Russia requires “unfriendly” countries to pay for gas in roubles

“[Buyers] must open rouble accounts in Russian banks.

"Nobody sells us anything for free, and we are not going to do charity either - that is, existing contracts will be stopped," Vladimir Putin commented, as he recently signed the decree attempting to boost national currency affected by countless Western sanctions following the invasion of Ukraine.

The decision requires foreign clients to open Gazprombank accounts and transfer euros or US dollars if aiming to buy Russian gas. The bank will further convert payments into roubles in order to make the final transactions.

Moreover, Russia threatened to cut off supplies if foreign buyers refuse to comply this request.

Germany accused Vladimir Putin of "blackmail", as the EU is somewhat dependant of the Russian gas and oil supplies, while Western companies have declined Russia’s demands due to the fact that the ongoing contracts stipulate euros or US dollars as payment.

Analysts at Fitch Solutions commented on the move by saying that cutting off gas to the EU would trigger a "major escalation not even performed at the height of the Cold War".

"It would mark another major financial blow to Russia's coffers," they added.

According to analyst Nathan Piper from Investec, Putin aims to increase the value of the rouble, a currency that was severely hit by recent international sanctions.

"However, long term Russia needs to remain a reliable supplier of gas so it is unclear if they would actually restrict gas supply.

"That said, even the risk of it is keeping UK/European gas prices at near record highs and six times the 10-year average. This is translating to steep rises in consumers' energy bills", Piper added.

The Nord Stream 1 gas pipeline was launched 10 years ago through a partnership between Russia and Germany. As Germany gets 50% of its gas supply and 33% of its oil supply from Russia, it has asked its citizens to prepare for future shortages and start focusing on reducing consumption. Austria is in the same situation, with 40% of its gas coming from Russian pipes. Measures in both countries aim for future resource rationing as part of the gas emergency plan.

Despite importing less than 5% of its gas from Russian sources, UK has also announced that it will not pay for it in roubles. Nevertheless, the country will be considerably impacted by increasing gas prices.

Bulgaria, a country that imports 90% of its gas supplies from Gazprom, has also started working on alternative plans in order to reduce Russian gas dependency.

Source: bbc.com