The European Union has been backed into a corner after the Russian President demanded payment in rubles for gas bought by “unfriendly” countries. The bloc, which is heavily dependent on Russian gas, has been looking for other sources of energy ever since Russia sent tens of thousands of troops into Ukraine on February 24.
Now, the Kremlin has issued a deadline on its threat to the EU, as Russian state backed oil company Gazprom has been given four days to figure out how to move billions of US dollars and euros of gas sale into rubles.
As a response to the West’s sanctions on Russia, Putin announced earlier this week: “Russia will continue, of course, to supply natural gas in accordance with volumes and prices … fixed in previously concluded contracts.
“The changes will only affect the currency of payment, which will be changed to Russian rubles.
“An understandable and transparent procedure of making payments should be created for (all foreign buyers), including acquiring Russian rubles on our domestic currency market.”
According to Gazprom, 58 percent of its sales of natural gas to Europe and other countries as of January 27 were settled in euros.
US dollars accounted for about 39 percent of gross sales and sterling around 3 percent.
This transition could prove to be difficult for Gazprom, the world’s biggest natural gas company by reserves.
Kremlin spokesperson Dmitry Peskov told reporters: “There is an instruction to Gazprom from the President of the Russian Federation to accept payments in rubles.”
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Mr Pescov added that the energy behemoth had four days to work out the specifics of the transition, after which “this information will be brought to the purchasers of Gazprom products”.
Russian gas accounts for some 40 percent of Europe’s total consumption with EU gas imports from Russia fluctuating between £167million to £668million (€200million to €800million) a day so far this year.
Angered by the sanctions imposed on Russia and major Russian oligarchs, Putin said that by freezing Russia’s reserves abroad, the US and EU had defaulted on their obligations and destroyed confidence in euro and dollar-denominated assets.
Putin said: “There is absolutely no sense in supplying goods to the European Union and the United States for dollars, euros and other currencies.”
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