EC Believes That It Should Not Agree to Russian Demand for Gas Payments in Rubles

European companies should not comply with the Russian demand to pay for gas in rubles as it contradicts signed contracts, said a spokesperson for the European Commission on Friday. The Commission emphasizes that ‘signed contracts must be respected and that in 97 percent of gas supply contracts it states that payments are to be made in dollars and euros, and that these companies should not agree to Russian demands’.

Russian President Vladimir Putin stated on Thursday that he signed a decree requiring buyers from ‘hostile’ countries to pay for Russian gas in rubles starting from April, through an intermediary bank in Russia. Buyers at the intermediary bank must open a special account and transfer the amount specified in the contract, mainly in euros and dollars. The bank will then sell them at an auction organized by the Moscow Exchange and transfer the proceeds in rubles to the gas supplier’s account.

Russia has included those countries that imposed sanctions on it, including the USA, EU member states, Britain, and Canada, on the list of ‘hostile’ countries. Germany and France rejected Russia’s demand on Thursday, stating that it is an unacceptable breach of contract and ‘blackmail’.

German Economy Minister Robert Habeck stated that Germany is prepared for all scenarios, including a halt to the supply of Russian gas to Europe. Russia’s attempt to divide Western allies by demanding payment for gas in rubles has failed, said Habeck. We will not allow ourselves to be blackmailed, he added.

French Finance Minister Bruno Le Maire stated that France and Germany have rejected the Russian demand.

Putin stated on Thursday that he signed a decree requiring foreign buyers to pay for Russian gas in rubles from April 1, or the contracts will be terminated.

– To buy Russian gas, they must open an account in rubles in Russian banks. And starting tomorrow, gas will be paid from those accounts – said Putin on television.

– If payments are not made in this way, we will consider it a mistake on the part of the buyer, with all the consequences that this entails. No one gives us anything for free, so we will not be a humanitarian organization. Therefore, existing contracts will be terminated – he added.

Putin’s decision led to a rise in the value of the ruble, which had fallen to historically low levels after the West imposed drastic sanctions due to the Russian invasion of Ukraine on February 24. However, Western companies and governments have rejected such a move as a violation of existing contracts under which gas is paid in euros and dollars.

Putin stated that the aim of the decree is to strengthen Russia’s sovereignty, which will fulfill its contractual obligations. Russia supplies about one-third of Europe’s gas needs.