Vladimir Putin threatened that the European Union would pay for his gas in rubles after the sanctions for the invasion of Ukraine, and the bloc warned that Moscow would not see a kopek if he changed his contracts. In the end, the Kremlin has devised a way for Europeans to pay in euros, but Russia gets rubles for its gas. Putin has signed this Thursday the decree establishing the new mechanism that will allow the Twenty-seven to pay their bills in euros while the state gas monopoly, Gazprom, receives rubles.
The rule, which comes into force on April 1, empowers Gazprom’s financial arm to act as a mediator with its clients. Specifically, the so-called “hostile countries” will have to open special accounts in Gazprombank, the only entity authorized by the Government, where they will pay for gas with their coins. Then, the entity will exchange the euros or dollars for rubles on the Moscow foreign exchange market, and that money will be immediately transferred to the gas supplier, which can only be Gazprom because it holds the state monopoly for its export outside Russian borders. .
Gazprombank is one of the few Russian banks that had not been sanctioned by the West. Russia, which also saw its fund of 640,000 million dollars in foreign currency for contingencies frozen, thus keeps open the entry of foreign currencies, essential to pay for its imports in the midst of war.
In addition, the law includes other traps. The Government Commission for the control of foreign investments will be able to issue permits to foreign buyers to pay for gas supply “without complying with the procedure”, and the central bank will have permission “to determine other procedures for the sale of foreign currency”. In other words, the Kremlin will have room to circumvent its own law as the conflict progresses.
However, the Kremlin insists that this is a strong response to Western sanctions. “If the hostile countries do not pay in rubles, the current contracts will be suspended,” said Putin on Thursday, who a week earlier announced the measure with great fanfare after denouncing that Western currencies are not trustworthy and “as suspected, the Obligations in dollars and euros can be breached. “Supplying our products to the European Union and the United States and receiving payment in dollars, euros or other currencies does not make any sense to us,” the president added at the time.
On the other hand, Putin has insisted on Thursday in his thesis that the European authorities act against the interests of their citizens. “If we simplify, Russian gas is the cheapest energy; heat and light in European homes; the affordable cost of fertilizers for their farmers and, as a result, of food. In the end it is the competitiveness of European companies and, therefore, of the salaries of European citizens”, he stated.
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