LONDON, (Reuters) – Russian President Vladimir Putin has ordered Gazprom GAZP.MM to accept payment in roubles for its natural gas exports to Europe and the gas behemoth has four days left to work out how to move over billions of dollars in sales, the Kremlin said.
After the West imposed sanctions on Russia over the conflict in Ukraine, Putin on Wednesday fired the first major salvo of Moscow’s response to what the Kremlin casts as a declaration of economic war against the world’s biggest nuclear power.
Putin said that Russia, which supplies 40% of Europe’s gas, would expect payment for natural gas in roubles, one of the sharpest turns in Russian energy politics since the Soviets built gas pipelines to Europe from Siberia in the early 1970s.
It is also a potential headache for Gazprom, the world’s biggest natural gas company by reserves.
“There is an instruction to Gazprom from the president of the Russian Federation to accept payments in roubles,” Kremlin spokesperson Dmitry Peskov told reporters.
Peskov said that Gazprom, a company so powerful in Russia that it is considered to be “a state within a state”, had four days left to work out a system for rouble payment.
“This information will be brought to the purchasers of Gazprom products,” Peskov said.
While the European Union bickered over an additional wave of sanctions this week, Putin said the United States and EU had defaulted on their obligations and torpedoed confidence in euro and dollar-denominated assets by freezing Russia’s reserves abroad.
“There is absolutely no sense in supplying goods to the European Union and the United States for dollars, euros and other currencies,” Putin said on Wednesday.
Russia, he said, would “start” with gas. Payments, Putin said, would be moved to roubles in the very shortest time.
The mechanism by which up to $880 million a day in Russian gas exports will be paid for in roubles is still unclear. Euros account for 58% of Gazprom exports with dollars accounting for 39% and sterling around 3%.
Putin’s move is revolutionary for the gas market: even the Communist Soviet Union accepted foreign currency for its energy exports and it was not immediately clear if the change to rouble payments would amount to a breach of contract.
Many importers said long-term contracts with Gazprom stipulated that payment should be made in either euros or U.S. dollars, not in Russian roubles.
