Russia appears to be softening its gas-for-rubles demand, easing supply risks to Europe — for now

  • In a call with German Chancellor Olaf Scholz on Wednesday, Russia’s Vladimir Putin said European companies could continue paying for gas supplies in euros or dollars.
  • Meanwhile, Kremlin spokesman Dmitry Peskov on Wednesday confirmed Russia would not be seeking gas payments in rubles immediately, saying instead that this switch is likely to be a “gradual process.”
  • Germany, alongside the G-7 nations, has signaled gas supply agreements cannot be unilaterally modified and European buyers of Russian gas say the Kremlin is not entitled to redraw long-term contracts.

Russia appears to have walked back demands that European companies pay for gas supplies in rubles from Thursday, temporarily alleviating the risk of supply disruptions.

It comes after Russia’s President Vladimir Putin repeatedly demanded that so-called “unfriendly” countries pay for gas in rubles, rather than in euros or dollars, targeting those behind the heavy economic sanctions designed to isolate Russia over its unprovoked onslaught in Ukraine.

Putin had instructed state-controlled gas giant Gazprom, the central bank and the government to outline proposals for how this policy would be implemented by Thursday. The currency switch for gas supplies had been rejected by major G-7 economies.

However, in a call with German Chancellor Olaf Scholz on Wednesday, Putin said European companies could continue paying for gas supplies in euros or dollars.

The money will be paid into Gazprom Bank and transferred in rubles to Russia, German broadcaster Deutsche Well reported.

Scholz did not agree to this procedure in the talks but asked for written information to better understand the proposal, according to the report.

The Kremlin said the currency switch was necessary due to the fact that the foreign exchange reserves of the Bank of Russia had been frozen by EU member states. It was agreed that experts from Russia and Germany would continue to negotiate on this matter, the Russian statement said.

Separately, Kremlin spokesman Dmitry Peskov on Wednesday confirmed that Russia would not be seeking gas payments in rubles immediately, saying instead the switch was likely to be a “gradual process.”

Germany, alongside the G-7, has signaled that gas supply agreements cannot be unilaterally modified and European buyers of Russian gas say the Kremlin is not entitled to redraw long-term contracts.

Most countries currently pay for Russian gas in euros or dollars.

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