Leon Mill spray paints a sign outside his Phillips 66 station in Perkasie, Pa., on June 1, 1973, to let his customers know he’s out of gas. An oil crisis was the culprit, squeezing U.S. businesses and consumers who were forced to line up at gas stations for hours.
On March 31, Russian President Vladimir Putin has signed a decree on payments for gas with «unfriendly countries» in rubles. According to the document, since April 1, Russian pipeline gas should be sold for rubles to “unfriendly countries”. So, the export-orienteered power seeks to secure gas delivery from blockages.
The key point highlights that regulations do not cover LNG.
Vladimir Putin stated: “We offer contractors from the list of countries a clear and transparent mechanism. They must open ruble accounts in Russian banks to purchase Russian natural gas”.
This payments’ system implies next:
- payments are done if the funds received the currency are credited to the ruble account
- the Central Bank sells this currency on the Moscow Stock exchange and credits the received currency to the ruble account
- transferring funds to a foreign currency account
- opening the accounts in Gazprombank of “K” type : ruble and foreign currency
The Russian leader said that the gas supplies would be financed from these accounts since April 1 and “if consumers refuse to pay under such framework, Russia will consider it non-fulfillment to the obligations with all ensuing consequences”.
The new payment mechanism for natural gas will be operated during the two time-frames. Supplies carried out from April 1 with “unfriendly countries” will be payed in the second half of April or in May, depending on the country.
The requirement does not mean that any of the customers will be left without gas immediately.
These measures followed western sanctions in financial sector. In accordance with it, Russia sees no point to use the “unfriendly” countries’ currencies while their financial system being “weaponized”.
“The foreign companies refuse to fulfill contracts with Russian banks, enterprises and individuals, and the Central Bank’s assets in dollars and euros are frozen”.
Vladimir Putin: “In fact, what is happening and what has already happened: we have supplied our resources (gas) to European consumers. They have received it, paid us in euros which have been frozen themselves. In this regard, we have every reason to believe that in fact we have delivered part of our gas to Europe free of charge”. On this occasion, there is no need to supply Russian goods to the European Union by euros.
On the other hand, Russia is to continue supplying natural gas in accordance with the volumes and pricing principles fixed in previously concluded contracts while buyers are given the opportunity to purchase rubles on the domestic Russian market according to a simple and transparent scheme (in this case both sides are satisfied – one of them transport energy and is payed for that while the other has the ability to use it without limits).
France, Great Britain, Austria, Poland, Lithuania have criticized the act and already refused to pay for gas in rubles. Earlier, the G7 and the European Commission stated that they consider Russia’s demand as a clear violation of contracts, and urged companies not to comply with it. The authorities of European countries stated that the payment should be made in the currency specified in the contracts. According to the head of the European Commission, Ursula von der Leyen, the transfer of gas payments in rubles is Moscow’s attempt to circumvent sanctions. But it should be mentioned that the currency of the contract has not been changed only the currency of payments. It implies that the contracts’ terms haven’t been violated.
At the press conference on March 31, Mr. Scholz said that Germany would continue to pay for Russian pipeline gas in euros in accordance with existing contracts. He stressed that the country is determined to decrease Russian oil and coal share in its energy balance until the end of the year but gas reduction would take more time, “not a couple of days”. The reason concludes in the infrastructural gap in Germany for the suppling of other, alternative, energy carriers.
Press secretary Dmitry Peskov responded to the actions by saying that Russia is not intended to “do charity” and supply gas to Western European countries for free: “no payment, no gas”. On March 30, Peskov said that Russia would not yet switch to ruble because this is a “time—stretched process.”
Also, the Russian President admitted that the transfer of payments in national currency is “an important step towards strengthening financial and economic sovereignty.”
“We will continue to consistently and systematically move towards this direction within the framework of a long-term plan in order to increase the share of settlements in the national currency and the currencies of countries that are reliable partners in foreign trade,” he stressed.
Thus, the world economy dominated by dollar and euro seems to being changed and structed by the new rules.
