MOSCOW (AP) — President Vladimir Putin announced Wednesday that Russia will require “unfriendly” countries to pay for Russian natural gas exports only in rubles from now on.
Putin said in a meeting with government officials that “a number of Western countries have taken illegitimate decisions on the so-called freezing of Russian assets, thereby drawing a line on the reliability of their currencies, undermining confidence in these currencies.
“It makes no sense,” Putin added, “to supply our goods to the European Union, the United States and receive payment in dollars, euros and a number of other currencies.”
As a result, he said he was announcing “steps” to switch to payment for “our natural gas, supplied to so-called hostile countries” in Russian roubles.
The Russian president did not specify when exactly the new policy will take effect. He instructed the country’s central bank to develop a procedure for natural gas buyers to acquire rubles in Russia.
Economists said the move appeared designed to try to prop up the rouble, which has slumped against other currencies since Putin invaded Ukraine on Feb. 24 and Western countries responded with sweeping sanctions against Moscow. But some analysts have expressed doubts that it would work.
“Demanding payment in rubles is a curious and probably ultimately ineffective approach to trying to circumvent Western financial sanctions,” said Eswar Prasad, professor of trade policy at Cornell University. “Rubles are certainly easier to find now that the currency is collapsing. But exchanging other currencies for rubles will be quite difficult given the widespread financial sanctions imposed on Russia.”
“The expectation that demanding payment in rubles will increase demand for the currency and thus support its value,” Prasad added, “is also a false hope given all the downward pressure on the currency.”
Neil Shearing, Group Chief Economist at Capital Economics, said: “It’s not an easy move for me, because the (Russian) economy needs a supply of foreign currency to pay for imports – and the Energy is one of the few remaining sources. ”
German Economy Minister Robert Habeck accused Putin of breaking contracts with the move, German news agency dpa reported. Habeck said in Berlin on Wednesday that the German government would discuss the issue with European partners.
Habeck said Putin’s announcement once again shows that Russia is not a stable partner, dpa reported.
Despite severe Western sanctions, natural gas flows are still heading from Russia to Europe. The European Union depends on Russia for 40% of the natural gas it needs to generate electricity, heat homes and supply industry – a key reason why the EU has not applied its sanctions to the Russian energy industry.
At the same time, across Europe, governments are slashing fuel taxes and doling out tens of billions to help consumers, truckers, farmers and others cope with worsening energy price spikes by Russia’s war against Ukraine.
Vinicius Romano, senior analyst at Rystad Energy, suggested that Moscow’s insistence on ruble payments “could encourage buyers to reopen other aspects of their contracts – like duration – and simply accelerate their exit from Russian gas”. .
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