Vladimir Putin may cut off a third of Europe’s gas supply today after governments rejected his demands to make payments in roubles with Germany calling it blackmail
Image: SPUTNIK/AFP via Getty Images)
Russia may cut off a third of Europe’s gas supply today after governments rejected Vladimir Putin’s demand for payment to be made in roubles, with Germany calling it “blackmail”.
Putin said he has signed a decree that foreign buyers must pay in roubles for Russian gas and in a televised address claimed contracts would be halted if these payments were not made.
It is the Russian leaders strongest response yet to massive economic sanctions that have been imposed by the West on the country following its invasion of Ukraine.
And a senior Russian foreign official said that the European Union will be hit hard for the sanctions, reported RIA.
“The actions of the EU will not remain unanswered … the irresponsible sanctions by Brussels are already negatively affecting the daily lives of ordinary Europeans,” Nikolai Kobrinets told the news agency.
European governments rejected Putin’s ultimatum for Friday of payments in roubles, with the continent’s biggest recipient of Russian gas, Germany, calling it “blackmail”. Moscow did, however, offer a mechanism for buyers to obtain roubles via a Russian bank.
The energy showdown has huge ramifications for Europe as US officials circle the globe to keep pressure on Putin to stop a five-week invasion that has uprooted a quarter of Ukraine’s population.
Europe wants to wean itself off Russian energy but that risks further inflating soaring fuel prices.
Russia has a key revenue source at stake even as it reels from sanctions.
Facing stiff resistance from Ukraine’s military, Putin has played one of his biggest cards in the demand on European energy buyers.
“They must open rouble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow,” Putin said.
AFP via Getty Images)
“If such payments are not made (in roubles), we will consider this a default on the part of buyers, with all the ensuing consequences … existing contracts will be stopped.”
With the war exacerbating global fuel prices, US President Joe Biden launched the largest release ever from the US oil reserve and challenged oil giants to drill more.
“This is a moment of consequence and peril for the world,” Biden said as he announced a release of 180 million barrels starting in May. But that amount fails to cover a US loss of Russian oil, which Biden banned this month.
Western governments say Putin’s demand for rouble payments would be a breach of contracts in euro or dollars.
An order signed by Putin allows customers to send foreign currency to a designated account at Russia’s Gazprombank, which would then return roubles for the gas buyer to make payment.
“Russia would have to physically halt gas flows to EU 27 to force the issue, marking a major escalation not even performed at the height of the Cold War. It would mark another major financial blow to Russia’s coffers,” said analysts at Fitch Solutions.