G7 rejects Russia’s demand to pay for gas in rubles

BERLIN: The Group of Seven major economies have agreed to reject Moscow’s demand to pay for Russian natural gas exports in rubles, the German energy minister said Monday.

Robert Habeck told reporters that “all G-7 ministers agreed completely that this (would be) a one-sided and clear breach of the existing contracts.”

He said officials from France, Germany, Italy, Japan, the United States, the United Kingdom and Canada met Friday to coordinate their position and that European Union representatives also were present.

Habeck said that “payment in ruble is not acceptable and we will urge the companies affected not to follow (Russian President Vladimir) Putin’s demand.”

Putin announced last week that Russia will demand “unfriendly” countries pay for natural gas only in Russian currency from now on. He instructed the country’s central bank to work out a procedure for natural gas buyers to acquire rubles in Russia.

Economists said the move appeared designed to try to support the ruble, which has collapsed against other currencies since Putin invaded Ukraine on Feb. 24 and Western countries responded with far-reaching sanctions against Moscow. But some analysts expressed doubt that it would work.

Asked by reporters earlier Monday if Russia could cut natural gas supplies to European customers if they reject the demand to pay in rubles, Kremlin spokesman Dmitry Peskov said in a conference call that “we clearly aren’t going to supply gas for free.”

“In our situation, it’s hardly possible and feasible to engage in charity for Europe,” Peskov said.

Asked what happens if Russia turns off the taps now, Germany’s energy minister said, “We are prepared for all scenarios.”

“Putin’s demand to convert the contracts to ruble (means) he is standing with his back to the wall in that regard, otherwise he wouldn’t have made that demand,” Habeck said, adding that Russia needs rubles to finance its war at home, such as payments to troops.

Russia is working out methods for accepting payments for its gas exports in roubles and it will take decisions in due course should European countries refuse to pay in the Russian currency, the Kremlin said on Monday.

The Russian central bank, the government and Gazprom , which accounts for 40 percent of European gas imports, should present their proposals for rouble gas payments to President Vladimir Putin by March 31.

Poland’s PGNiG, which has a contract with Gazprom until the end of the year, has also said it cannot simply switch to paying in roubles.

The EU aims to cut its dependency on Russian gas by two-thirds this year and end Russian fossil fuel imports by 2027.

On Friday, the United States said it will work to supply 15 billion cubic meters of liquefied natural gas (LNG) to the European Union this year.

US LNG plants are producing at full capacity and analysts say most of any additional US gas sent to Europe would have to come from exports that would have gone elsewhere.

Russian gas exports to the EU were at around 155 bcm last year.

(With Reuters)