Global Energy Crisis: Putin Demands Ruble Payment for Gas

Russian ruler, Vladimir Putin has devised another means to frustrate and escalate the ongoing global energy crisis – per Bloomberg report, the Russian leader is set to demand the local currency, Ruble as payment for Russian Oil and Gas export.

According to the report, Russia plans to demand Ruble payments for purchases from European nations – deepening its fallout and standoff with the West and potentially increasing Europe’s worst energy crisis since the 1970s.

Following the report, gas prices are said to have surged more than 30% after Putin ordered the Russian central bank to develop a process that allows ruble payments for natural gas within a week at a meeting with his government.

Russia’s oil and gas supplies have been used as a major weapon between both Russia and the West over the ongoing war in Ukraine. Although the new directives by Russia are not clear, Investors King gathered that this move could be a breach of contract between Russia and a number of countries that purchase its resources. However, by demanding payments in rubles, Russia is essentially forcing European companies to directly increase value for its local currency after the value of the Ruble dropped due to sanctions placed on the Russian economy.

Investors King also gathered that the ruble has gained 7% against the dollar on Wednesday, 23rd March summing up its entire losses in the year to 23%.

Reactions To Putin’s Demands

Germany: Following Russia’s demand, Germany’s Economy Minister Robert Habeck, revealed that the demand for payment in the ruble is a breach of the contracts, and Germany will speak to its European partners on how to respond. Germany is the biggest buyer of Russian gas.

Italy: Revealed that it wasn’t inclined to pay for Russian gas in rubles because doing that could help Putin weaken Europe’s sanction regime. Italy is the second-biggest customer of Gazprom PJSC –  the Russian state export monopoly company.

The demand to pay in Ruble may be a huge problem for Russia as well because If Gazprom refuses to deliver gas when buyers pay their invoices in the original contract currency – usually euros – buyers may bring the case to arbitration. However, sales to the west accounted for some 70% of Gazprom’s 2021 export revenue which totalled some $69 billion and any changes to the payment procedures could “temporarily affect” Russia’s gas export volumes.