Russia’s Gazprom has halted gas deliveries to Poland and Bulgaria over the countries’ refusal to pay in rubles.
In March, Russian President Vladimir Putin ordered “unfriendly” countries to pay for gas in rubles in response to the US-led Western sanctions campaign aimed at decimating Russia’s economy. Some of the sanctions specifically targeted Russia’s use of the dollar and the euro.
Kremlin spokesman Dmitry Peskov told reporters Wednesday that asking for payments in rubles and cutting off Poland and Bulgaria’s gas supply was a result of the sanctions campaign. “The need for a new payment method was a result of unprecedented unfriendly steps in the economic sphere and the financial sector, which were taken against us by unfriendly countries,” he said.
Under Putin’s payment plan, European countries have to set up an account at Russia’s Gazprombank so they can transfer foreign currency to the bank. Gazprombank would then purchase rubles on behalf of the buyer, which will be used for the gas deal.
While Poland and Bulgaria refused to pay in rubles, some European countries are complying. According to a report from Bloomberg that cited a person close to Gazprom, at least four European gas buyers have paid for supplies in rubles, and 10 European countries have set up accounts at Gazprombank. The person said that if other countries refuse to pay in rubles, more cutoffs aren’t expected until the second half of May, when more payments are due.
After Gazprom made its announcement, European gas prices surged 28%. Because Europe is so reliant on Russian gas, European countries are facing severe economic consequences if they lose the supply. According to a German economic institute, Germany would face a sharp recession if Russian gas supplies were suddenly cut off, making Berlin likely to comply with the ruble payment system.