European countries’ dependence on Russian gas and other exports has been thrown into the spotlight since Russia sent tens of thousands of troops into Ukraine on February 24 in what it called a special operation to degrade its southern neighbour’s military capabilities and root out people it called dangerous nationalists. EU leaders are mulling an oil embargo on Russia with some member states pushing for cuts to energy imports from the Communist state.
But Putin moved one step ahead of the bloc and issued a staunch warning today.
He said: “Russia will continue, of course, to supply natural gas in accordance with volumes and prices … fixed in previously concluded contracts.
“The changes will only affect the currency of payment, which will be changed to Russian rubles.”
Putin said the government and central bank had one week to come up with a solution on how to move these operations to the Russian currency and that gas giant Gazprom would be ordered to make the corresponding changes to gas contracts.
According to Gazprom, 58 percent of its sales of natural gas to Europe and other countries as of January 27 were settled in euros.
US dollars accounted for about 39 percent of gross sales and sterling around 3 percent.
Russian gas accounts for some 40 percent of Europe’s total gas consumption.
“An understandable and transparent procedure of making payments should be created for (all foreign buyers), including acquiring Russian rubles on our domestic currency market,” Putin added.
Ukrainian forces have mounted stiff resistance to Russia’s actions and the West has imposed sweeping sanctions on Russia in an effort to force it to withdraw its forces.
Russia has drawn up a list of “unfriendly” countries, which corresponds to those that imposed sanctions.
Among other things, deals with companies and individuals from those countries have to be approved by a government commission.
The list of countries includes the United States, European Union member states, Britain, Japan, Canada, Norway, Singapore, South Korea, Switzerland and Ukraine.
The Russian ruble briefly leapt to a three-week high past 95 against the dollar on Wednesday in Moscow, before settling close to 100, after Putin’s announcement.
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The potential ramifications of the move could boost the Russian currency, with a host of European countries still dependent on Moscow for much of their energy supplies.
By 13:13 GMT, the ruble was 3.4 percent stronger against the dollar at 100.02, earlier clipping 94.9875, its strongest since March 2.
It had gained 3.5 percent to trade at 110.50 versus the euro.
The ruble had stabilised near 105 to the dollar in recent sessions after falling to a record low of 120 in Moscow this month and even further on the interbank market to 150.
Before Russia’s attack on Ukraine, the ruble traded at about 80 to the dollar.