Russian President Vladimir Putin has demanded that so-called "unfriendly countries" pay for his country's natural gas exports in rubles as the nation tries to bring the value of its currency up after it was severely affected by Western sanctions.
The leader's remarks are the latest development in the tensions between Moscow and other countries as Russian troops continue their invasion of Ukraine. Putin said that his country will refuse to accept payments for natural gas supplies that are made in other currencies such as dollars and euros.
Russian Natural Gas Exports
During a government meeting, the Russian president said that he has decided to implement a new set of measures to transfer payment for the country's gas supplies to unfriendly countries. Europe's gas prices saw a surge following Putin's remarks with the region's gas benchmark, the TTF month-ahead contract, seeing a 19% rise before retreating and ending the day lower.
Russia is known to be a large supplier of natural gas and provides roughly 40% of the EU's supply, a dependency that has cast a shadow over Europe's response to the war on Ukraine. Leaders have scrambled to reduce the region's reliability of Russian natural gas exports since the beginning of the invasion, as per the Wall Street Journal.
Putin said that his decision stemmed from the "illegitimate decisions on the so-called freezing of the Russian assets" made by Western countries. He argued that this resulted in a line being crossed over "reliability of their currencies" and has undermined the trust for those currencies.
But the Russian president previously said that the country would continue to supply natural gas in accordance with volumes and prices fixed in previously concluded contracts. Moscow also revealed a list of the so-called unfriendly countries, which includes the U.S., members of the European Union, Britain, Japan, Canada, Norway, Singapore, South Korea, Switzerland, and Ukraine.
According to The Hill, the Kremlin leader's remarks also came several weeks after the European Union announced a plan to reduce its reliance on Russian natural gas by roughly two-thirds in 2022. European authorities plan to get off Russian fossil fuels entirely by the end of the decade.
Putin's Demands
However, German Economy Minister Robert Habeck called the Russian president's demand a breach of contract as other buyers of Russian natural gas shared similar views. A senior Polish government source said that Putin's decision would constitute a breach of payment in currency contracts. They added that Poland was not planning to sign new contracts with Gazprom.
Major banks are also now reluctant to trade in Russian assets due to Western sanctions, making Putin's demands even more complicated. A spokesperson for Eneco, a Dutch gas supplier, said that it had a long-term contract denominated in euros.
Gazprom said that 58% of its natural gas sales to Europe and other countries as of Jan. 27 were made in euros. It also noted that U.S. dollars accounted for roughly 39% of gross sales and sterling was at about 3%.
Commodities that are traded worldwide are largely made in U.S. dollar or euro, which when put together, make up about 80% of worldwide currency reserves. In an interview, Energy Minister Alexander Nikolov said that there was no danger regarding the gas supply, Yahoo News reported.
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