More on our top story: Germany has declared an “early emergency” for gas supplies, convened a crisis group to monitor the situation, and is moving closer to gas rationing, ahead of Moscow’s Thursday deadline for gas payments in roubles.
Germany, Europe’s largest economy, is particularly reliant on Russia for natural gas. The German economy minister Robert Habeck called on consumers and businesses to reduce consumption, telling them “every kilowatt hour counts”. While supplies were safe for now, “we must increase precautionary measures to be prepared for an escalation on the part of Russia”.
Vladimir Putin said on 23 March that Russia would seek payment in roubles for gas sold to “unfriendly” countries, i.e. European nations and the United States, which have imposed sanctions on Moscow over its invasion of Ukraine. Putin’s message was: If you want our gas, buy our currency.
The Russian president has set 31 March as the deadline for the rouble payments, as Moscow is working out the practical arrangements. However, European countries, which pay mostly in euros, have so far rejected the demand, with Germany and Poland calling it a breach of contract. The stand-off has stoked fears of disruption to gas flows as the deadline approaches.
Russia’s switch to rouble payments appears to be mainly politically motivated, although it could also help prop up the Russian currency, which slumped to record lows when western sanctions were imposed. The rouble has since staged a (partial) recovery to trade at 83.73 per dollar this morning, up 2%, and at 92.6 per euro, up 1.5%.
Kremlin spokesperson Dmitry Peskov told reporters on Tuesday:
No one will supply gas for free, it is simply impossible, and you can pay for it only in roubles.
Referring to the new rouble payment mechanism, Peskov said “all modalities are being developed so that this system is simple, understandable and feasible for respected European and international buyers”.
Today, Russia’s top lawmaker suggested that Russia should switch to rouble payments for other commodities. Vyacheslav Volodin, the speaker of Russia’s lower house of parliament, said in a post on Telegram: “If you want gas, find roubles,” before suggesting that rouble payments should be extended to oil, grains, metals, fertiliser, coal and timber for roubles on global markets where it is profitable to do so.
Asked about this, Peskov said:
This is an idea that should definitely be worked on.