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Gas purchase contracts in Europe fall into uncertainty with Russia's ruble decree

Uncertainties emerged in Europe's gas purchase contracts after Russia announced that it had switched to rubles for payments for natural gas sales to "unfriendly countries".

Gas purchase contracts in Europe fall into uncertainty with Russia's ruble decree

The Russian government approved the list of countries that are not friendly to Russia on March 7.

The list includes countries such as the USA, European Union countries, the United Kingdom, South Korea, Japan, Ukraine, Switzerland and Singapore, as well as 15 other countries that have imposed sanctions on Russia.

According to the decree signed by Russian President Vladimir Putin on March 30, the relevant countries that buy Russian gas must open an account at Gazprombank, and after making the payments to this bank, the funds in question will be converted into rubles on the Moscow Stock Exchange.

In a statement after signing the decree, Putin said that gas contracts will be stopped if unfriendly countries do not accept the new system.

In line with the decree, it is foreseen that Western countries will continue to make their payments in foreign currency, but there will be changes in some procedures as the payments must be made to the account to be opened at Gazprombank.

After Germany and France announced that they refused to pay in rubles, uncertainties emerged in Europe's gas purchase contracts.

"By decree, Gazprom will have the right to cut off the gas flow"
Katja Yafimava, Energy Studies Specialist at Oxford Institute, told Anadolu Agency (AA) that according to the new payment procedure, European buyers' payments in euros continue. It will be transferred to your account." used the phrases.

Yafimava noted that the new payment system introduced by the decree is not inconsistent with the current supply conditions.

Stating that he thinks some European buyers can agree to follow the new procedure, Yafimava said, "In this case, the supply will continue as normal. On the other hand, some buyers may argue that the contracts should be adjusted to cover the change made and may refuse to follow the new procedure until the contracts are fixed. In this case, until the next payment date. If adjustments are not made and payments are not made in accordance with the new procedure, by decree Gazprom will have the right to cut off the gas flow." made its assessment.

"Retaliation to the West and the USA"
Richard Kauzlarich, an expert at the Washington-based think tank Brookings Institution and the former US Ambassador to Baku, said that most energy contracts do not have a currency set and a unilateral breach could void the contracts.

Stating that the decree signed by Putin is a retaliation against the sanctions of the USA and Western countries, Kauzlarich said, "Making the payments to an escrow account outside of Russia may be another solution. Moscow can only deal with such accounts when the sanctions are lifted and Ukraine's humanitarian or humanitarian crisis resulting from Putin's occupation. "I think Putin's move is a retaliation against US and Western sanctions." he said.

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