Putin asks to pay for Russian gas in rubles, Germany opens voice

Jakarta, CNBC Indonesia – Since last week, Russian President Vladimir Putin said countries “unfriendly” to him would be required to pay for energy products such as natural gas in rubles.

By demanding payments in Russian currency, rather than in dollars or euros, as contracted, Putin is trying to shore up the value of the ruble, which sank after his country invaded Ukraine.

The US dollar is up nearly 13% against the Russian ruble since February 24, when Russia began its offensive into Ukraine, after surging about 85% in early March.

In response, German Finance Minister Christian Lindner asked Putin to think about the consequences. If you pay in rubles, this will lead to a spike in European gas prices.

“We are completely against any form of extortion. This agreement is based on euros and (US) dollars, so we recommend that private sector companies pay (Russia) in euros or dollars,” Lindner said Monday (28/3/2022), quoted from CNBC International.

“If Putin doesn’t want to accept this, it’s open for him to think about the consequences,” he added.

Last week, German Chancellor Olaf Scholz said paying for oil in rubles would violate the contract. Italian officials also said they would not pay in rubles because that would help Russia evade Western sanctions for its attack on Ukraine.

Nonetheless, tensions over future payments could disrupt the ongoing flow of natural gas from Russia to Europe. The region receives about 40% of its gas imports from Russia and this figure is even higher for some European countries, notably Hungary which gets 95% of its gas imports in 2020 from Russia.

The region’s dependence on Russian energy has prevented the bloc from imposing an oil embargo on Moscow as part of its sanctions regime. This is in contrast to the US White House which has banned imports of Russian oil and gas.

The European Union has said it will overhaul its approach to energy and reduce its dependence on Russia. This is a plan that has been put forward since early March, suggesting cutting Russian gas imports by two-thirds before the end of the year.

“We will look for a solution. We are working to reduce our dependence on Russian imports and if (Putin) decides to cut his supply, we will have to be more independent from Russia,” Lindner said.

Europe is now scrambling to source its energy from elsewhere. The United States, for example, on Friday announced a new deal with the European Union to supply the bloc with 15 billion cubic meters of liquefied natural gas this year.

[Gambas:Video CNBC]

(tfa/tfa)


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