Embarrassing U-turn for Putin as Kremlin rows back on ruble ultimatum for EU

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The Russian President had demanded EU countries pay Moscow in rubles for their gas imports as soon as this week, in reaction to harsh western sanctions against the Communist regime. But as European leaders refused to succumb to Putin’s threats, the Russian leader was forced to U-turn his decision.

Asked whether European countries were expected to pay in rubles as soon as today, Thursday, March 31, Kremlin spokesman Dmitry Peskov on Wednesday said: “Absolutely not.”

Speaking at a press conference in Moscow, he added: “Payments and delivery are a time-consuming process.

“From a technological point of view, this is a more prolonged process.”

Germany triggered an emergency plan to manage gas supplies on Wednesday under which Europe’s largest economy could ration power if a standoff over the Russian demands persists.

Moscow’s insistence on ruble payments for the Russian gas that meets a third of Europe’s annual energy needs has galvanised others in Europe: Greece called an emergency meeting of suppliers, the Dutch government said it would urge consumers to use less gas and the French energy regulator told consumers not to panic.

The demand for rubles, which has been rejected by Group of Seven (G7) nations, is in retaliation for crippling western sanctions on Russia following its invasion of Ukraine.

Moscow, which says it is conducting a “special military operation” there, calls Western measures an “economic war”.

Russia’s most senior lawmaker said on Wednesday Russia could demand ruble payments also for other commodities including oil, grain, fertilisers, coal and metals, raising the risk of recession in Europe and the United States.

Moscow was expected to make public its plans for ruble payments on Thursday, although it said it would not immediately demand that buyers pay for gas exports in the currency.

Putin told German Chancellor Olaf Scholz by phone on Wednesday that nothing would change for European partners and payments would still be made in euros and transferred to Gazprom bank, a German spokesperson said.

Separately, Putin outlined the ruble plan in a phone call with Italian Prime Minister Mario Draghi, Draghi’s office said.

Two Russian sources told Reuters as one of the options for the switch, Russia planned to keep contract prices for gas exported to “unfriendly” countries but demand the payment to be done in the ruble equivalent on a pre-agreed settlement day.

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Western countries have said payment in rubles would breach contracts that can take months or more to renegotiate, a prospect that has driven commodity prices higher.

It would also blunt the impact of Western curbs on Moscow’s access to its foreign exchange reserves and bolster its currency.

The European Union is preparing more sanctions against the Kremlin, EU sources told Reuters on Wednesday, with their scope depending on Moscow’s stance on gas payments in rubles.

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