Russia has announced a review of the Rubles-for-gas-mandate issued by President Vladimir Putin on March 31, and became effective on April 1.
Putin signed the decree forcing some purchasers of Russian gas to set up a special account to pay for their supplies as the country tries to cope with the impact of Western sanctions imposed because of Moscow’s unprovoked invasion of Ukraine last month.
The law said buyers of Russian gas from what Russia deems “unfriendly” countries would have to set up special “K-accounts” to transfer their payments. Once the payment is received, the funds will be exchanged into rubles. The entire payment facility will be set up and run through Russia’s Gazprombank, a subsidiary of state energy giant Gazprom.
Putin also said any country rejecting this payment mechanism will be in violation of their contracts and face “corresponding repercussions.” European leaders rejected the policy saying it would undermine sanctions imposed on Moscow because of the war in Ukraine.
Yesterday, Russia’s foreign minister, Sergey Lavrov, issued a statement published in India Today, clarifying the rubles for gas mandate, and it is said to have created confusion among Russia’s gas buyers.
The foreign minister henceforth, buyers purchasing Russia’s gas will have to pay Gazprombank, an independent institution. He explained that the buyers will no longer be able to pay for gas using Gazprom’s bank accounts abroad – “precisely because those funds could then be frozen by sanctions.”
According to Lavrov, Russia’s demands to change the payment method for gas exports to rubles is
“obvious and understandable” given Western sanctions, which have frozen half of Russia’s foreign assets.
“They will pay the same amount that they owe under existing contracts, but they will pay through a special account that they will have to open in this bank,” Lavrov clarified.
In the new policy, buyers can still pay in the currency of their choice. But Gazprombank will convert the payment into rubles. Gazprom would then be able to access the funds in rubles, assured that those funds would not be subject to sanctions.
“They won’t be able to keep this money in their banks. They will still pay in euro or dollars, but we will have guarantees,” Lavrov added.
Russia had set a March 31 deadline for the countries it considers “hostile”—including the United States, all EU member states, Switzerland, Canada, Norway, South Korea, Japan, and many others—to start paying in rubles for natural gas, although the EU has rejected Putin’s demands for payments in rubles.
Russia did not immediately cut off the gas supply to Europe after April 1, partly because it is dependent on revenues from gas and partly because payments for gas delivered after April 1 are not due until later this month or early May.