Russian gas in rubles .. Who pays the price?

On Friday, French President Emmanuel Macron considered that asking Russian President Vladimir Putin to pay for gas shipments to the European Union in rubles, not in dollars or euros, “is not possible” and “is not provided for in the contracts.”
In response to a question put to him after the European summit in Brussels about the declaration issued by Moscow on Wednesday, Macron said that the Russian request “is not in line with what was signed, and I see no reason to implement it.”
“We continue our analytical work,” he added, but “all the signed texts are clear: this is prohibited. So European players who buy gas and are on European soil have to pay in euros.”
Emmanuel Macron stressed that “it is not possible to do what is required, which is not stipulated in contracts.”
With this demand, the French president considered that Moscow is seeking to establish a “bypass mechanism” on the economic and financial sanctions imposed by the Europeans in the wake of the invasion of Ukraine.
For its part, Germany, concerned with buying Russian gas, denounced the “breach of contract” by Putin, who gave his government a week to set up the new ruble payment system.
Germany relies heavily on Russian gas, which represents about 55 percent of its total gas imports.
Despite the war in Ukraine, Russian gas continues to flow into the European Union, which refuses to ban it. But European countries pledged to speed up reducing their dependence on Russian gas.
“We are a very big buyer of Russian gas, and what we consider a weakness for us is also a weakness for Russia, which cannot change the structure of its pipelines overnight,” the French president said.
Putin’s orders
The Kremlin said on Friday that President Vladimir Putin had ordered Russia’s energy giant Gazprom to accept payments for its natural gas exports to Europe in rubles and that it should work out how to convert billions of dollars in sales into rubles within the next four days.
On Wednesday, Putin announced the first in a series of reactions to what the Kremlin described as declaring economic war on the world’s largest nuclear power.
Putin said that Russia, which supplies 40 percent of Europe’s gas needs, expects to get in return for selling natural gas in rubles, in one of the strongest shifts in Russian energy policies since the Soviets built pipelines to transport gas from Siberia to Europe in the early 1970s. .
This would also present a potential problem for Gazprom, the world’s largest natural gas company by reserves.
“There are instructions issued by the President of the Russian Federation to Gazprom to accept payments in rubles,” Kremlin spokesman Dmitry Peskov told reporters.
Peskov added that Gazprom has four days to arrange a ruble payment system. “Buyers of Gazprom products will be informed of this information,” he said.
As European Union countries battle each other over imposing an additional set of sanctions on Russia this week, Putin said the United States and the European Union had defaulted on their commitments and eroded confidence in dollar and euro assets by freezing Russia’s reserves abroad.
“Absolutely, there is no sense in supplying the European Union and the United States with goods in exchange for the dollar, the euro and other currencies,” he said.
The mechanism by which Russian gas exports, worth up to $880 million per day, will be paid for, remains unclear. Payments in euros represent 58 percent of Gazprom’s exports, while payments in dollars constitute 39 percent, while payments in pounds sterling represent about 3 percent.
Putin’s move represents a revolution in the gas market, as the communist Soviet Union itself accepted the payment of the value of its energy exports in foreign currencies. It was not immediately clear whether switching to euro payments would be a breach of contract. Many importing companies said long-term contracts with Gazprom stipulate that payments are to be made in euros or US dollars, not Russian rubles.
(agencies)