Russian President Vladimir Putin has authorized the government, the central bank, and Gazprombank to take the necessary steps to switch all payments for Russian natural gas from “unfriendly states” to rubles starting March 31.
The measure targets “member states of the EU and other countries that have introduced restrictions against citizens of the Russian Federation and Russian legal entities,” the mandate published on the Kremlin website reads.
Russia will stop shipping natural gas to countries refusing to settle payments in rubles, Kremlin spokesperson Dmitry Peskov said on Monday.
The decision, first announced last week, came as Russia’s oil trade has been left in disarray as importers put orders on hold due to the latest sanctions introduced against Moscow over its military operation in Ukraine.
The conflict in Ukraine and the anti-Russia sanctions that followed have raised concerns of a global economic crisis. Skyrocketing commodity prices are sending the costs of consumer goods, energy, and food ever higher, giving rise to fears of a possible recession in many countries and even hunger in some parts of the world.
Russia’s decision to switch payments to its domestic currency has been made in response to the unprecedented penalties imposed by the US and its allies on the country’s financial system.
The ruble plummeted to record lows after Western nations and Japan blocked Russia’s access to some of its international reserves. Since last week’s currency-switch announcement, the ruble has reached its strongest level against the US dollar and the euro in nearly a month.
G7 rejects Russian demand to pay for gas in rubles
The Group of Seven major economies have collectively agreed to reject Moscow’s demand to pay for gas imports from Russia in rubles, according to German Energy Minister Robert Habeck.
“All G7 ministers agreed completely that this [would be] a one-sided and clear breach of the existing contracts,” Habeck told journalists on Monday.
The minister added that “payment in rubles is not acceptable” and that the nations will urge the companies affected “not to follow” the demand issued by Russian President Vladimir Putin last week.
On Monday, Putin ordered the government, the central bank, and Gazprombank to develop the necessary tools to switch all payments for Russian natural gas from “unfriendly states” to rubles from March 31.
This includes countries that have targeted Russia’s financial system and seized its foreign reserves in response to the crisis in Ukraine.
Kremlin spokesperson Dmitry Peskov said Russia will stop shipping natural gas to countries that reject the demand.
India ready to bypass dollar in trade with Russia
A system allowing direct rupee-ruble payments in trade between Russia and India could be launched this week, the president of the Federation of Indian Export Organizations (FIEO), A Sakthivel, told CNBC on Wednesday. The arrangement would allow India and Russia to carry out financial operations bypassing the US dollar. Russia is effectively blocked from using US currency due to Western sanctions over the conflict in Ukraine.
According to the official, the Indian government is working on a proposal to allow up to five nationalized Indian banks to be engaged in the rupee-ruble trade mechanism, and discussions between the central bank governor, the finance minister, and the banks on the matter have already been held. The arrangement would let Indian exporters continue doing business with Russia despite sanctions banning, among other things, international payment mechanisms in the country, such as SWIFT. It would also let India continue buying Russian energy exports and other goods.
According to Sakthivel, the Indian economy could profit from sanctions Russia is facing, as they give Indian exporters an opportunity to expand on the Russian market.
“Export to Russia is not much, only in agriculture and pharmacy products. Now that the whole of the West is banning Russia, there will be a lot of opportunities for Indian firms to enter Russia,” he stated.
India’s finance ministry and the Reserve Bank of India have not yet commented on the new trade arrangement.
Update(9:01ET): Russia on Monday has issued a firm and unyielding response to G-7 ministers who had dismissed as "unacceptable" its plan to only accept ruble payments for Russian gas going to "unfriendly" nations.
Earlier Monday German Economy Minister Robert Habeck said from Berlin that the Kremlin demand for natural gas contracts to be paid in rubles is a "one-sided and clear breach of contracts" - saying the contracts must be honored under prior conditions, according to Bloomberg. "That means that a payment in rubles is not acceptable and we urge the relevant companies not to comply with Putin’s demand," Habeck said. "Putin’s effort to drive a wedge between us is obvious but you can see that we won’t allow ourselves to be divided and the answer from the G-7 is clear: the contracts will be honored."
The Kremlin's quick shooting down of the German economy minister's comments and the G-7's stance on the ruble came Monday via a Russian lawmaker to state-run RIA Novosti: "Russian lawmaker Abramov says G7's refusal to pay in Russian roubles for gas will definitely lead to a halt in supplies."
Elsewhere the Kremlin said it's not running a "charity" - according to TASS:
Moscow is handling the details of its gas delivery plans to unfriendly countries for payment in rubles, but it won’t engage in charity if Europe refuses to pay in the Russian currency, Kremlin Spokesman Dmitry Peskov told reporters on Monday.
...The Kremlin spokesman remained tight-lipped on what measures Russia might take if Europe refused to pay for gas in rubles, noting that these "issues should be sorted out as they develop." "But we will definitely not supply gas for free, that’s for sure. It is hardly possible and reasonable to engage in charity in our situation," he emphasized.
Putin has reportedly set a deadline for days away...
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