Russian President Vladimir Putin’s threat that “unfriendly” countries would pay for Russian natural gas exports in rubles only from now on received the unfriendly treatment by European Union nations on Thursday.
Janez Jansa, Slovene Prime Minister, stated that “I don’t think anyone in Europe really knows how rubles look like.” “Nobody will pay rubles.”
Others may put it bluntly. It came down to the exact same — from the German Chancellor Olaf Scholz, to the Italian Prime Minister Mario Draghi. Mario Draghi is an ex-chief of the European Central Bank and knows a lot about currencies.
Putin suggested that Western sanctions against the Kremlin and the freezing of Russian assets had “effectively drawn a line over the reliability of their currencies, undermining trust for these currencies.”
Putin would rather have Russian rubles than dollars and euros to buy Russian gas.
Economists claimed that the move was intended to support the ruble. Since Russia invaded Ukraine in February 24, Western countries responded by imposing severe sanctions on Moscow.
However, making such demands would fundamentally alter contracts and render them null, European leaders stated during the first day at their EU summit.
Scholz stated that “What we’ve learned so far boils down the fact there are fixed contracts all over the world, where the currency used to make payment is also part of the contract.” These are the starting points from which we must work.
Draghi stated that Putin pushing through the plan would be a violation to existing contracts.
Considering the skyrocketing gas prices, Alexander De Croo, the Belgian Prime Minister, saw potential in the proposal. However, it was not what Moscow wanted.
De Croo stated, “In all cases, if one part of a contract has been changed, then we can discuss a whole range other issues including the price.”
The Russian threat is very real as the EU imports 90% natural gas to generate electricity, heat homes, and supply industry. Russia supplies almost 40%.
Putin will use any financial help he can to save the ruble, which is in serious trouble due to the strict economic sanctions. Putin instructed Russia’s central bank in order to create a process for natural gas buyers to purchase rubles in Russia.
However, some analysts doubted that it would work.