Prepare to switch to rubles for natural gas exports by March 31, Vladimir Putin tells Gazprom and Russia’s central bank

Prepare to switch to rubles for natural gas exports by March 31, Vladimir Putin tells Gazprom and Russia's central bank

Vladimir Putin has told Gazprom, the central bank, and the government to prepare to start taking rubles for natural gas.

He gave the institutions until Thursday, March 31, to finalize their plans to switch currency away from euros and dollars.

However, it is far from clear how the move will play out, with European companies appearing reluctant to change payment currency.

Russian President Vladimir Putin has ordered the country’s biggest gas company and central bank to prepare to start taking rubles for natural gas payments from “unfriendly” countries, saying they should outline their plans by March 31.

Putin blindsided traders in the natural gas market last week by announcing Russia would make countries deemed hostile pay for the product in rubles. Russia accounts for around 45% of EU gas imports, with pipeline exports to Europe normally paid for in euros.

The President appeared keen to push ahead with the plan on Monday. He ordered Gazprom, the central bank and the government to prepare reports outlining how it will make the switch by Thursday, March 31, according to state news agency Tass. It was not immediately clear whether the switch itself would take place Thursday.

Analysts have said Putin is trying to shore up the Russian currency and to make life more complicated for Western countries that have sanctioned Moscow over its war against Ukraine.

“At face value this appears to be an attempt to prop up the ruble by compelling gas buyers to buy the previously free-falling currency in order to pay,” Rystad Energy senior analyst Vinicius Romano said last week.

“What is clear however, is that this has added another element of uncertainty to the already chaotic European gas market by complicating gas purchases that many countries have been reluctant to cut.”

The head of the European Commission, Ursula von der Leyen, accused Russia of blackmail last week and said the move would be a clear breach of contract.

The boss of Italian energy company Eni, Claudio Descalzi, said at a panel in Dubai on Monday that the company would not be paying for gas in rubles.

European natural gas prices have soared due to Russia’s invasion of Ukraine, and pushed higher last week when Putin announced the payment plan.

Dutch TTF gas futures, Europe’s benchmark price, were up 4.7% Monday to 106 euros per megawatt hour. However, that was below last week’s high of around 127 euros and far lower than a price of more than 300 euros hit earlier this month.

The ruble was 4.1% higher against the dollar, with $1 changing hands for 98.1 rubles. It has risen relatively sharply since plunging to a low of around 140 rubles to the dollar in early March.

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