Kremlin Decree: Foreign Currency Can Still Buy Natural Gas
ROME (AP) — “Hostile countries” can continue to pay for natural gas in foreign currencies through a Russian bank that will convert the money into rubles, according to a Kremlin decree published by state media on Thursday. , a day after the leaders of Italy and Germany said they had received assurances from President Vladimir Putin.
Putin spoke harsher, saying Russia will start accepting payments in rubles from Friday for Western countries that have imposed sanctions over its dispute with Ukraine. He said contracts will be terminated if buyers do not agree to new terms, including opening ruble accounts in Russian banks.
“If these payments are not made, we will consider this as the buyer’s failure to fulfill his obligations, with all the ensuing consequences,” Putin said.
The decree signed by Putin and published by state news agency RIA Novosti says a designated bank will open two accounts for each buyer, one in foreign currency and one in roubles. Buyers will pay in foreign currency and allow the bank to sell this currency for rubles, which will be placed in the second account, where the gas is officially purchased.
Speaking shortly after Putin’s announcement, German Chancellor Olaf Scholz gave an initial noncommittal response to Russia’s new terms. He said gas contracts stipulate payment mainly in euros and sometimes in dollars. He said he made it clear to Putin in a phone call on Wednesday “that it will stay that way.”
“What his ideas about how this can happen is what we will now examine closely,” Scholz told reporters in Berlin. “But in any case, what applies to companies is that they want and will be able to pay in euros.”
Italian Prime Minister Mario Draghi said earlier on Thursday he had also received assurances from Putin that Europe would not have to pay in rubles and aired fears that Moscow would cut gas supplies used for heating and electricity.
Draghi said Putin assured him in a 40-minute phone call Wednesday night that “existing contracts remain in place. … European companies will continue to pay in dollars and euros.
Putin announced last week that Russia would require “unfriendly” countries to pay for natural gas only in Russian currency, asking the central bank to develop a procedure for buyers to acquire rubles in Russia. This has pushed already high gas prices even higher amid fears it could be a prelude to a natural gas cut, which could disrupt Europe’s economy and hurt Russia’s finances. Major Group of Seven economies, including Italy and Germany, agreed to reject the request.
Draghi said Putin gave a lengthy explanation of how to maintain euro and dollar payments while satisfying Russia’s “ruble payment indication”.
Draghi said he had referred the discussion to experts and that an analysis was underway “to understand what this means”, including whether “European companies can continue to pay as planned, whether this means anything for pending sanctions”.
“The feeling is one I’ve had from the start, that it’s absolutely not straightforward to change the currency of payments without breaching contracts,” Draghi said.
Draghi also told the foreign press that Europe was pushing for a cap on gas prices with Russia, saying its payments were funding the war in Ukraine and that the prices paid by Europe did not match the world market.
“We – Germany and Italy, as well as other countries importing gas, coal, grain, corn – are financing the war. There is no doubt,” Draghi said. “For this reason, Italy and other countries are pushing for a gas price cap. There is no substantial reason for the gas price to be so high for Europeans.
Draghi noted that Russia has no other market for its gas, which gives Europe some breathing room. Asked about the risk that Russia reacts by turning off the taps, Draghi replied: “no, there is no danger”.
The prospect of continued deliveries of gas in exchange for euros aroused a cautious reception from German industry.
“This is good news, at least in the short term, because Russian gas supplies cannot be replaced in the short term,” said Achim Dercks, deputy director general of the Association of Chambers of Commerce and Industry. German industry, at RBB24 Inforadio.
He noted that companies are concerned that any cuts will affect the industry in particular, “but ultimately it would have serious economic effects for all of us”.