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Russia Orders Gas Payments In Rubles by All ‘Unfriendly’ Countries by March 31

Published: March 28, 2022
A Russian ruble coin is pictured with US dollar bills and a one dollar coin in Moscow, on March 15, 2022. - Russia has suspended the sale of foreign currencies until Sept. 9, the central bank said in a statement, amid unprecedented economic sanctions on the country following its offensive in Ukraine. (Image: AFP via Getty Images)

On Monday, March 28, Russian President Vladimir Putin instructed his government, the Russian central bank and Russian state-owned energy giant Gazprom to demand payment in rubles for the delivery of gas to “unfriendly countries.” 

The embattled leader reportedly asked for a report on the implementation of the measures by March 31.

In a statement, the Russian president ordered the government to implement “a set of measures to change to the Russian ruble the currency of payment for natural gas supplies to the European Union and other countries that have introduced restrictive measures against citizens of the Russian Federation and Russian legal entities.” 

On March 23, Putin said that there is no longer any reason to continue using the dollar or euro following sanctions by the U.S. and European Union.

On March 7, following Russia’s invasion of Ukraine and a flurry of unprecedented sanctions by numerous countries opposed to Russia’s “special military operation” the Kremlin published a lengthy list of countries it now considers “unfriendly.”

Any country on the list, which  includes every member state of the European Union, as well as Canada, the UK, the U.S. and numerous other states, are being told that they must drop the U.S. dollar or euro as a payment method for Russian natural gas and move to the ruble.

On Monday, German Economy Minister, Robert Habeck, speaking on behalf of all G-7 countries, said the demand represented a breach of Russia’s contractual obligations, asserting that Germany, the world’s largest buyer of Russian gas, by law, settles all energy contracts in euros. 

“Putin is clearly attempting to divide us. We will not be divided, and the answer of G-7 states is unambiguous: Contracts must be adhered to,” Mr. Habeck said according to the Wall Street Journal

Should Putin’s demand be met, it would mean western companies would be forced to circumvent sanctions imposed on Russia for its invasion of Ukraine, and would prop up the Russian currency at a time when the ruble is extremely volatile. 

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‘Unfriendly countries’

On the twelfth day of Russia’s invasion of Ukraine and following the implementation of debilitating international sanctions, the Kremlin published a decree stating that all corporate deals with companies and individuals from “unfriendly countries and regions” must now be approved by the Russian government commission. 

The Commission for Control over Foreign Investments was established by the Kremlin in 2008 to monitor foreign investment in strategic sectors. 

The decree instructs Russian citizens, companies, the state itself, its regions and municipalities that have foreign exchange obligations to foreign creditors to demand payment in rubles. The directive applies to payments exceeding 10 million rubles (US$104,440.00) per month or a similar amount in foreign currency. 

The decree was signed by Russian Prime Minister Mikhail Mishustin and was prompted by another decree issued by Putin himself on March 1 titled, “On additional temporary measures of an economic nature to ensure the financial stability of the Russian Federation.”

Numerous western countries have announced tough sanctions on Russia, including banning a selection of Russian banks from the international SWIFT payment system. The SWIFT payment system facilitates international payments among some 11,000 financial institutions and removing major Russian banks from the system is reportedly hampering the Russian central banks ability to deploy its international reserves.

In a television appearance on March 4 on the state-controlled Rossiya 24 news channel Putin called on neighboring countries “to think about how to normalize relations,” Newsweek reported. 

Putin said, “I want to emphasize once again. We have no ill intentions towards our neighbors, and I would advise them not to escalate the situation, nor to introduce any restrictions,” adding that “All our actions, if they arise, always arise exclusively in response to unfriendly actions against Russia.”