# Russia sets deadline for rouble gas payments, Europe calls it ‘blackmail’
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-31
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Putin demands payment in roubles for gas or face supply cut
Meta Description: Vladimir Putin demands rouble payments for Russian gas, threatening supply cuts. Western capitals refuse to comply, calling it 'blackmail'.
URL: https://financedigest.com/russia-sets-deadline-for-rouble-gas-payments-europe-calls-it-blackmailhtml

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By Joseph Nasr and Mark Trevelyan

BERLIN/LONDON (Reuters) – Russian President Vladimir Putin is demanding foreign buyers pay for Russian gas in roubles from Friday or else have their supplies cut, a move European capitals rejected and which Berlin said amounted to “blackmail”.

Putin’s move, via a decree signed on Thursday, leaves Europe facing the prospect of losing more than a third of its gas supply. Germany, the most heavily reliant on Russia, has already activated an [emergency plan that could lead to rationing in Europe’s](https://www.financedigest.com/exclusive-europe-ready-for-baltics-emergency-switch-off-from-russian-grid.html "Exclusive: Europe ready for Baltics emergency switch-off from Russian grid") biggest economy.

Energy [exports are Putin’s most powerful lever as he tries to hit](https://www.financedigest.com/u-s-oil-exports-to-europe-hit-record-in-march-on-steep-discounts.html "U.S. oil exports to Europe hit record in March on steep discounts") back against sweeping Western sanctions imposed on Russian banks, companies, businessmen and associates of the Kremlin in response to Russia’s invasion of Ukraine. Moscow calls its [Ukraine action](https://www.financedigest.com/analysis-action-wanes-at-u-n-to-isolate-russia-almost-six-months-into-ukraine-war.html "Analysis: Action wanes at U.N. to isolate Russia almost six months into Ukraine war") a “special military operation.

In televised remarks, Putin said buyers of Russian gas “must [open rouble accounts in Russian banks](https://www.financedigest.com/barclays-private-bank-opens-new-office-in-verbier-switzerland-for-2022-23-ski-season.html "Barclays Private Bank opens new office in Verbier, Switzerland for 2022/23 Ski Season"). It is from these accounts that [payments will be made for gas delivered](https://www.financedigest.com/bankart-nets-ready-deliver-european-vision-making-instant-payments-new-normal.html "Bankart and Nets ready to deliver on European vision of making instant payments the new normal") starting from tomorrow,” or April 1.

“If such payments 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,” he said.

It was not immediately clear whether in practice there might still be a [way for foreign firms to continue payment](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments") without using roubles, which the European Union and G7 group of states have ruled out.

His decision to enforce rouble [payments has boosted](https://www.financedigest.com/how-the-epa-plans-to-boost-confidence-in-the-uk-payments-industry-post-brexit.html "How the EPA plans to boost confidence in the UK payments industry post Brexit") the Russian currency, which fell to historic lows after the Feb. 24 invasion. The rouble has since [recovered much lost](https://www.financedigest.com/qa-am-i-eligible-to-recover-my-lost-off-plan-funds-in-spain.html "Q&A: Am I eligible to recover my lost off-plan funds in Spain?") ground.

Western companies and governments have rejected any move to change their gas [supply contracts to change the payment](https://www.financedigest.com/how-to-bring-immediacy-back-to-the-supply-chain-with-faster-payments.html "How to Bring Immediacy Back to the Supply Chain With Faster Payments") currency. Most [European buyers use euros](https://www.financedigest.com/european-governments-spend-half-a-trillion-euros-on-energy-crisis-report-2.html "European governments spend half a trillion euros on energy crisis – report"). [Executives say](https://www.financedigest.com/uber-executive-says-european-taxis-joining-platform.html "Uber executive says European taxis joining platform") it would take months or longer to renegotiate terms.

Payment in roubles would also blunt the impact of Western curbs on Moscow’s access to its [foreign exchange](https://www.financedigest.com/small-business-strategies-for-foreign-exchange.html "Small business strategies for foreign exchange") reserves.

Meanwhile, European states have been racing to secure [alternative supplies](https://www.financedigest.com/europes-alternatives-if-russia-shuts-off-gas-supply.html "Europe’s alternatives if Russia shuts off gas supply"), but with the global market already tight, they have few options. The United States has offered more of its liquefied natural gas (LNG) but not enough to replace Russia.

Germany Economy Minister Robert Habeck said Russia had not been able to divide Europe and said Western allies were determined to not be “blackmailed” by Russia.

Berlin said it would continue paying for Russian [energy imports in euros](https://www.financedigest.com/europes-spend-on-energy-crisis-nears-800-billion-euros.html "Europe’s spend on energy crisis nears 800 billion euros").

FROZEN PAYMENTS

France’s economy [minister Bruno Le Maire said France and Germany were preparing for a possible scenario that Russian](https://www.financedigest.com/permitted-share-of-chinas-yuan-in-russian-wealth-fund-doubled-to-60-finance-minister.html "Permitted share of China’s yuan in Russian wealth fund doubled to 60% -Finance Minister") gas flows could be halted.

Le Maire declined to comment on technical details linked to latest [Russian demands for rouble](https://www.financedigest.com/russian-rouble-nears-4-week-high-versus-dollar.html "Russian rouble nears 4-week high versus dollar") payment.

The order [signed by Putin creates a mechanism for payments](https://www.financedigest.com/italys-nexi-signs-digital-payments-deal-with-tims-olivetti.html "Italy’s Nexi signs digital payments deal with TIM’s Olivetti") to be made via special foreign currency and rouble accounts at Gazprombank, with the foreign money to be converted into roubles via currency auctions on a Moscow exchange.

Putin said the switch would strengthen Russia’s sovereignty, saying the Western countries were using the financial system as a weapon, and it made no sense for Russia to trade in [dollars and euros](https://www.financedigest.com/dollar-jumps-euro-dips-before-fed-minutes.html "Dollar jumps, euro dips before Fed minutes") when assets in those currencies were being frozen.

“What is actually happening, what has already happened? We have supplied [European consumers](https://www.financedigest.com/european-airlines-see-travel-withstanding-consumer-squeeze-for-now.html "European airlines see travel withstanding consumer squeeze for now") with our resources, in this case gas. They received it, paid us in euros, which they then froze themselves. In this regard, there is every reason to believe that we delivered part of the [gas provided to Europe practically free of charge,”](https://www.financedigest.com/demand-for-automotive-gas-charged-shock-absorbers-market-to-be-fuelled-by-rapid-shift-in-consumer-perception-and-increasing-awareness.html "Demand for Automotive Gas Charged Shock Absorbers Market to be Fuelled by Rapid Shift in Consumer Perception and Increasing Awareness") he said.

“That, of course, cannot continue.”

Putin said Russia still [valued its business](https://www.financedigest.com/beyond-compliance-creating-business-value-with-legal-entity-identifiers.html "Beyond compliance: creating business value with Legal Entity Identifiers") reputation.

We comply and will continue to comply with obligations under all contracts, including gas contracts, we will continue to supply gas in the prescribed volumes – I want to emphasise this – and at prices specified in existing, [long-term contracts,”](https://www.financedigest.com/hermes-secures-long-term-contract-extension-with-kingstown-associates.html "Hermes secures long-term contract extension with kingstown associates") he said.

Several European companies with Russian contracts had no immediate comment or did not immediately respond as [Putin’s announcement sent further shivers through the market](https://www.financedigest.com/dollar-soars-to-two-decade-high-as-putin-shakes-fx-market-ahead-of-fed.html "Dollar soars to two-decade high as Putin shakes FX market ahead of Fed").

[European gas prices have rocketed higher](https://www.financedigest.com/european-shares-end-higher-on-china-recovery-optimism.html "European shares end higher on China recovery optimism") in recent months on mounting tension with Russia raising the risk of recession. Soaring [energy prices](https://www.financedigest.com/heavy-norwegian-gas-maintenance-adds-to-energy-price-pressure.html "Heavy Norwegian gas maintenance adds to energy price pressure") have already forced companies, including makers of steel and chemicals, to curtail production.

Poland’s PGNiG, which has a long term contract with Russia’s gas [pipeline export monopoly Gazprom that expires](https://www.financedigest.com/norway-plans-to-nationalise-gas-pipelines-when-concessions-expire.html "Norway plans to nationalise gas pipelines when concessions expire") at the end of this year, had no immediate comment. The Polish Climate Ministry also had no immediate comment. The Polish contract with Gazprom is for 10.2 billion cubic metres of gas a [year and is denominated in dollars](https://www.financedigest.com/dollar-creeps-up-in-subdued-start-to-new-year.html "Dollar creeps up in subdued start to new year").

Italian [energy firm](https://www.financedigest.com/varo-energy-buys-80-of-dutch-biogas-firm-aims-to-double-capacity-by-2026.html "Varo Energy buys 80% of Dutch biogas firm; aims to double capacity by 2026") Eni, another major European buyer of Russian gas, also had no comment. It bought [around 22.5 bcm of Russian gas](https://www.financedigest.com/gas-insulated-transformer-market-estimates-the-to-expand-at-around-5-4-cagr-from-2021-to-2031-2.html "Gas Insulated Transformer Market Estimates The To Expand At Around 5.4% CAGR from 2021 to 2031") in 2020. Its contracts with Gazprom expire in 2035.

Germany buyers of Russian gas – Uniper, RWE and EnBW’s and VNG – did not immediately respond to requests for comment.

[(Reporting by Reuters](https://www.financedigest.com/thomson-reuters-report-reveals-risk-compliance-staff-expect-to-see-significant-benefits-from-artificial-intelligence-ai-and-distributed-ledger-technologies.html "Thomson Reuters Report Reveals Risk & Compliance Staff Expect to See Significant Benefits from Artificial Intelligence (AI) and Distributed Ledger Technologies") correspondents including Stephen Jewkes in Milan, Joseph Nasr and Tassilo Hummel in Berlin, Nina Chestney in London, Marek Strzelecki in Warsaw; Writing by Mark; Editing by Edmund Blair)


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