President Vladimir Putin today signed a decree making it mandatory for the buyers of Russian gas from countries deemed hostile to pay in roubles from Friday (April 1, 2022, using a special account at a Russian bank, otherwise their gas supply will be suspended.
“No rubles, no gas” is a slogan which Russians are chanting from today.
Worth to note is that every day, Europeans consume Russian gas, amounting to 200 million to 800 million euros ($880 million), depending on the season. This factor greatly weakens the effect of the sanctions, regardless of how the payments are made – and while converting the sums into a stronger rouble will boost Russia’s coffers.
The European governments, including Germany, have rejected this Russian demand, terming it “political blackmail”.
Putin’s order is in retaliation to unprecedented Western sanctions imposed on Russia over its invasion of Ukraine, which Moscow says are akin to an economic war.
“If such payments [in roubles] are not made, we will consider this a default on the part of buyers, with all the ensuing consequences. Nobody sells us anything for free, and we are not going to do charity either – that is, existing contracts will be stopped,” Putin said on Thursday.
The rouble plunged to historic lows after Putin sent his troops into Ukraine on February 24 as the United States and its allies moved to remove Russia from global payment systems, cut off its central bank from capital markets and froze hundreds of billions of dollars of its reserves.
The currency, however, has recovered following Putin’s decision to enforce rouble payments. On Thursday, more than a week after the Russian president first said Moscow would start selling its gas to “unfriendly countries” in roubles, the currency traded at 81.7 to the US dollar, almost the same level as February 23.
Meanwhile, there also seems to be a political goal, leaving Western countries with the prospect of either being forced to circumvent their own sanctions by having to deal with Moscow’s blacklisted central bank, or have their supplies cut.