Russia announced today (Wednesday) that it will now demand payment in rubles only for the natural gas it exports to Europe, a move that could threaten the continent’s continued energy supply. Russian President Vladimir Putin announced the move at a cabinet meeting broadcast on the state channel. “I have decided to implement a series of measures that will shift the payment for our gas to countries that are not friendly to the Russian ruble,” Putin said. He said the move would take effect within a week at most. The list of “unfriendly” countries includes all EU countries, the United States, Canada and a number of countries that have joined sanctions against Russia.
The dramatic announcement could affect continued energy exports to the EU. Although crude oil sales have almost come to a halt, natural gas flowing through pipelines through Ukraine, Belarus and other countries continues to move to countries like Germany and Italy, which have made it clear they cannot afford to stop imports due to the dramatic repercussions on their economies.
German Chancellor Olaf Schultz is one of the strongest opponents in the EU of adopting a comprehensive energy embargo on Russia, as demanded by other countries, which are less dependent on Russian energy.
Now, if the move is implemented, the EU will have to decide whether to continue buying gas from Russia and how to make the payments for it. The EU pays between 500 and 600 million euros to Russia daily for natural gas alone, due to its high prices. More than half of that is paid by Germany alone. The Russian move is intended to effectively circumvent financial sanctions, which do not allow the Russian central bank to exploit its foreign exchange reserves in the free market, and prevent it from converting various currencies into rubles.
The Russian government stopped free trade in rubles two days after the start of the war in Ukraine, and has not opened trade since. The ruble exchange rate in markets outside Russia now stands at 100 rubles per dollar, while about two weeks ago it stood at 150 rubles per dollar. The German DAX index is down about 2% as of 4:00 PM (Israel time) and the price of a barrel of Brent’s crude oil has risen by 5% to $ 120 a barrel.