Why Putin’s Demand for Rubles Has Europe Scrambling

Russian President Vladimir Putin’s decree imposing a new payments system for gas supplies has placed the European Union and Russia at loggerheads, with Moscow demanding that EU companies open accounts in rubles. The issue, sparked by Russia’s war in Ukraine and the Western response to it, escalated on April 27 after Russia cut off gas sales to Poland and Bulgaria, which refused to pay in rubles. At stake is European unity, with some countries including Germany more reliant on Russian gas than others. The EU’s legal guidelines so far have left some companies and governments confused.

Putin said on March 31 that he wanted his country’s gas bought in local currency, from April 1. The deposit of euros or dollars on the supplier’s account would no longer be considered fulfillment of contractual obligations. Companies would first have to pay for gas using a euro account; then funds would have to be converted into rubles and sent into a second account at state-controlled Gazprombank JSC. It’s only after the funds reach the ruble account that the payment would be considered complete. Putin said that if payments aren’t made in rubles, then gas exports would be halted. Europe depends heavily on Russian gas to heat homes and power industry.