In late February, the United States and its allies imposed economic sanctions on Russia. However, as we reported on Monday, the European Union (EU) currently gets about 40% of all its energy from Russia, including 41.1% of its gas supplies. Now it looks like Europe has shot itself in the foot and it is Russia’s turn to deal an economic blow to Europe.
Russia said on Thursday it would halt gas supplies to buyers from “unfriendly” countries unless they switch to ruble payments from April 1. For those of you who might think this is some kind of April Fool’s joke. The Russian president was bluffing when he first made the announcement a week ago.
Today, Russian President Vladimir Putin signed a decree requiring “unfriendly countries” to pay for Russian gas in rubles. The question is what is wrong with Russia selling its natural resources in its own currency. The new law requires “unfriendly countries” to open accounts in Russian banks and comes into effect tomorrow, April 1.
“To buy Russian gas, they need to open ruble accounts in Russian banks,” Putin said in a televised address on Thursday. “From these accounts, the gas will be paid from April 1st. If such payments are not made, we consider this as a breach of the customer’s obligations.”
The new law will also oblige European buyers to open special accounts with the state-controlled Gazprombank so that the foreign currency can be exchanged for rubles for settlements. President Putin added that ongoing gas supply deals would be halted if buyers from “unfriendly countries” failed to meet new payment terms.
Meanwhile, the EU said on Monday it expects the European Union to remain dependent on energy imports from Russia for at least five years, according to a report by the TASS news agency. The commission added that its dependence on Russian gas will not end until at least 2027. Russia currently covers about 40% of EU needs and supplies about 175 billion cubic meters per year.
Below is a video of President Putin’s speech.