Russian natural gas to be purchased only with rubles – How will Europe respond?

Countries that purchase natural gas from Russia will soon be paying in rubles rather than euros or dollars, as has been the case until now. This was announced by Russian President Vladimir Putin during a cabinet meeting.

As reported by the Tass news agency, the Russian president said: «I have decided to implement a set of measures for payment—let's start with that—for our natural gas supplied to so-called unfriendly countries, in Russian rubles as soon as possible,» he said.

He added that with this decision, foreign consumers will have to convert «unfriendly currencies» into rubles for future changes in natural gas contracts with unfriendly countries. «I ask the government to issue a corresponding directive to Gazprom to amend existing contracts. At the same time, all foreign consumers should be given the opportunity to carry out the necessary work,» Putin stressed.

However, Putin made it clear that Russia will continue to supply natural gas to other countries in accordance with the quantities and prices specified in previously concluded contracts. «I want to emphasize that Russia will, of course, continue to supply natural gas in accordance with the quantities and prices, the pricing principles specified in the contracts concluded earlier,» Putin stressed.

It should be noted that the Russian president's important announcement comes on the eve of the NATO and EU summit on the crisis in Ukraine. Analysts believe that the West was taken by surprise and that this is a political message from Vladimir Putin and, ultimately, yet another response to the sanctions imposed on Russia. This is a measure that supports the ruble, which has fallen to historic lows, and will strengthen the Russian economy.

How will Europe respond?

Given that Washington has already decided on an embargo on Russian gas and oil, the issue mainly concerns European Union countries, where Russian gas and oil continue to flow. The issue is likely to be raised at the summit in Brussels. A European source said that leaders may consider whether Moscow's request could threaten the effectiveness of the sanctions imposed by the EU on Russia over its invasion of Ukraine.

However, the first reactions have already been recorded. «Russia's demand for payment for natural gas in rubles constitutes a «breach of contract,»« the German government said, while Rome also said that Italy does not intend to pay for Russian gas in rubles. »My view is that we will pay in euros because paying in rubles would be a way to circumvent sanctions. So I believe we will continue to pay in euros," said Italian Prime Minister Mario Draghi's economic adviser, Francesco Giacovacci, according to Bloomberg.

The question that arises after Putin's move is whether Europe could respond with an embargo. Although this cannot be ruled out, it seems particularly difficult at this stage, as Germany and other European countries reject this scenario due to their heavy energy dependence on Russia.

«A halt to energy imports from Russia is not feasible overnight,» Chancellor Olaf Scholz has pointed out, promising that dependence on Russian energy «will be ended as soon as possible.» «However, hasty moves would put Germany at risk of a severe recession and threaten hundreds of thousands of jobs,» he warned, stressing that sanctions against Moscow «should not hurt the European Union more than Russia.».

«The production and supply of electricity for companies cannot be ensured in any other way at this time,» insists the Federation of German Industries (BDI), while it is indicative that the issue is causing division in German society. According to an ARD-DeutschlandTrend poll, 44% of Germans would support an immediate halt to natural gas deliveries, while 45% say no.

«It was a move by Putin that many did not expect in this form,» says economist Jens Sudekum, a professor at the University of Düsseldorf. «Putin is making the Russian central bank a “key player” again,» Professor Sudekum wrote on Twitter. «This indirectly pressures the West to bypass its own sanctions. Under these circumstances, «the scenario of a universal embargo on Russian natural gas has become more likely today, whether we like it or not,» notes the German professor.