European leaders are bucking Russian strongman Vladimir Putin’s demand that the European Union and United States pay for Russian natural gas in rubles.
German Chancellor Olaf Scholz rejected the request and noted that it would represent a breach of existing contracts between the two powers. Europe depends on Russia for approximately one-quarter of its oil imports and 40% of its natural gas, and Putin was undoubtedly trying to use the dependency to shore up the falling ruble.
“We’ve looked at this to try to get an overview. What we have learned so far is that there are fixed contracts everywhere, which include the currency in which payments are made,” Scholz said during a Thursday press conference. “And most of the time, it says euro or dollar … and that’s what counts then.”
FEARS GROW OF CORNERED RUSSIA CUTTING OFF NATURAL GAS TO EUROPE
Francesco Giavazzi, an economic adviser to Mario Draghi, Italy’s prime minister, also pushed back on the notion of Italy using rubles to buy its gas from Russia. He pointed out the obvious: that the demand is merely a last-ditch effort to try to circumvent some of the damage from the crippling sanctions the West has imposed as a result of the ongoing war in Ukraine.
“My view is that we pay in euros because paying in rubles would be a way to avoid sanctions, so I think we keep paying in euros,” said Giavazzi.
The rebuffs come a day after Putin declared that “unfriendly” countries such as those in Western Europe and the United States would be forced to use rubles for gas purchases. The missive caused the ruble to increase in value briefly and become worth more than a penny, although since the pushback from Europe, the ruble has slid back to being worth less than one U.S. cent.
Since the war began, Russia has raised the notion of stopping natural gas from flowing into Europe, a development that would have major ripple effects across the global economy and energy markets.
Earlier this month, Russian Deputy Prime Minister Alexander Novak threatened to cut off natural gas to Germany and Europe at large in retaliation for Germany’s decision to stop certification of the Nord Stream 2 pipeline.
“We have every right to take a matching decision and impose an embargo on gas pumping through the Nord Stream 1 gas pipeline,” Novak warned.
“So far, we are not taking such a decision,” he added. “But European politicians with their statements and accusations against Russia push us towards that.”
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While the threat might just be empty rhetoric, energy prices have skyrocketed since the war began. Gasoline prices hit record highs in the U.S., and fears of a global energy shortage brought on by the conflict grew.
In Russia, the economy has been floundering since it was hit by the sanctions. At the outset of Russia’s war in Ukraine, the exchange’s index plunged as much as 45% before rebounding to trade down 33%. The exchange opened back up for limited stock trading on Thursday and ended up gaining more than 4% (although short selling and foreign stock sales were prohibited).
