Putin: "Energy Payments Will Only Be Accepted in Rubles"... Europe Reacts with "Breach of Contract"

Putin Orders Russian Central Bank to Establish Ruble Payment System
Unfriendly Countries Account for 70% of Gazprom's Last Year's Export Value... $69 Billion Scale

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Russia has declared that it will only accept payments in rubles for energy sales such as natural gas to the European Union (EU) and others, prompting backlash from counterpart countries. Germany, the largest importer of Russian natural gas, called it a "breach of contract" and immediately began discussing countermeasures.

On the 23rd (local time), major foreign media including Bloomberg reported that Russian President Vladimir Putin announced that payments for gas sales to unfriendly countries participating in asset freeze sanctions would only be accepted in rubles. President Putin instructed the Central Bank to establish a ruble payment system within a week.

Previously, Russia designated 48 countries including the United States, United Kingdom, European Union (EU), and South Korea, which led or participated in economic sanctions against Russia, as unfriendly countries. President Putin explained, "The supply price and quantity will be maintained according to previous contracts," adding, "The only change is the payment currency."

This decision is interpreted as a measure to defend the ruble exchange rate. After President Putin's announcement, the ruble's value rose about 7% against the dollar, reaching around 98 rubles per dollar.

Europe, which depends on Russia for 40% of its natural gas through euro payments, is opposing the move. Robert Habeck, Germany's Vice Chancellor and Minister for Economic Affairs and Climate Action, stated, "The announcement to pay in rubles is a breach of contract," and said he would discuss countermeasures with European countries.

Francesco Giavazzi, economic advisor to Italian Prime Minister Mario Draghi, said at the Bloomberg Capital Markets Forum held in Milan, "Paying in rubles is a means of coercion, so I believe payments should be made in euros."

Anis Gambold, analyst at Aurora Energy Research, forecasted, "If the buyer pays in the original contract currency (usually euros) and Gazprom refuses to deliver gas, the buyer could request arbitration through litigation."

Dmitry Polvoy, economist at Rakko Invest, said, "Unfriendly countries account for 70% of Gazprom's export value last year, amounting to about $69 billion (approximately 84.1662 trillion KRW)," evaluating that "attempting to change the payment procedure will temporarily affect Russia's export volume."

According to the most recent bond prospectus published by Gazprom, 58% of the company's gas export revenue was paid in euros in the third quarter of last year. Payments in dollars accounted for about 39%.

This content was produced with the assistance of AI translation services.