Failure to pay for gas in rubles is a breach of contract

Speaking at a meeting on the aviation sector, Russian President Vladimir Putin said that if customers buying gas from “unfriendly countries” refuse to pay in rubles, Russia will consider it a violation. contract.

“If such payments are not made, we will consider that to mean the buyer’s failure to fulfill their commitments and apply all terms thereafter.” Mr. Putin said.

Russian President Vladimir Putin signed a decree regulating the payment of gas in rubles on March 31. According to Bloomberg, Russia will stop supplying gas to buyers from unfriendly countries unless they switch to ruble payments from April 1.

If the buyer does not accept the new terms, Russia will cut off the supply.

To buy Russian gas, “they need to open an account in rubles in Russian banks”, according to Mr. Putin.

Russian state news agency RIA Novosti said the designated bank will open two accounts for each buyer, one in foreign currency and one in rubles. The buyer will pay in foreign currency and authorize the bank to transfer the amount in rubles on the Moscow currency exchange. After that, the ruble will be put into the second account, where the gas purchase is officially made.

European leaders, though, are cautious to insist they will continue to pay for natural gas in euros and dollars and want to see clarity on how the Kremlin will implement the decree.

Some economists argue that shifting gas payments to rubles won’t do much for the Russian currency, as Russian gas exporter Gazprom has to exchange 80% of its foreign currency earnings anyway. to rubles.

Analysts at Evercore ISI say that even if Russia is able to force the EU to pay for gas in rubles, European countries could retaliate by imposing additional taxes or outright bans on imported oil from the EU. Russia. Thus, although Russia may sell oil, the price is likely to fall sharply.

In the wave of sanctions targeting Russia after the conflict in Ukraine, many concerns arise about energy supplies when Russia is a major supplier to Europe. The European economy remains heavily dependent on Russia for energy, with 40% of its gas and 25% of its oil imports coming from the country.

While the US and UK have said they will stop buying Russian oil, European leaders shy away from making the same move. Instead, they focus on reducing imports from Russia over the next few years.