Putin’s Rubles-for-gas Decree Sets In

© Mikhail Metzel/POOL/TASS

Vedomosti: Putin prohibits Gazprom from accepting euros and dollars from the EU

On March 31, Russian President Vladimir Putin signed a decree turning foreign currency payments for Russian pipeline gas supplies to "unfriendly" countries into rubles. Unfriendly countries include those that placed sanctions on Russia following the launch of the special military operation in Ukraine. According to experts interviewed by Vedomosti, the concept averts fines and speculative risk, as payments may have previously become stranded in a European bank.

Russia will view refusal of paying for gas in rubles as breach of contract — Putin

The document requires unfriendly foreign buyers of pipeline gas (i.e., Gazprom clients) to create accounts in Russian banks beginning April 1 in order to pay for supplies. Under this mechanism, the buyer opens currency and ruble accounts with Gazprombank (GPB), pays for gas supplies via transfer to a foreign currency account, and then the bank exchanges this currency into rubles on the Moscow Exchange and deposits them into the buyer's ruble account, as described by commodity markets analyst at Otkritie investments Oksana Lukicheva. The gas is thus paid for in rubles from the buyer's ruble account.

According to a Gazprombank representative, the bank is Russia's third-largest systemically important bank with an international presence, and has "many years of experience in addressing Gazprom's needs in a wide range of settlements" with clients.

A source familiar with the new mechanism's development told Vedomosti that the presidential order pertains to payment for gas supplied beginning April 1. According to the source, payments for April gas begin in the second part of April in some Gazprom contracts and in May in others.

This is not the mechanism that will lead to the "creation of the ruble as the currency of international settlements," Renaissance Capital's Russia & CIS analyst Sofya Donets noted. Buyers of gas do not need to look for rubles. The concept, however, eliminates the penalties and speculative danger, as payments could have ended up stuck in a European bank before that.

A mechanism that allows formal payment, but makes sure that Russia does not receive it, is now impossible, Director for Analysis of Financial Markets and Macroeconomics at Alfa-Capital Management Company Vladimir Bragin told the newspaper.