Putin gives Gazprom four days to arrange payment in rubles from ‘unfriendly’ countries

The move was met with dismay in Europe where contracts with Gazprom stipulated that payment should be made in either euros or US dollars

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President Vladimir Putin has ordered Russian energy giant Gazprom to accept payments for its natural gas exports in rubles and it must work out how that can be done in the next four days, the Kremlin said on Friday.

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Kremlin spokesperson Dmitry Peskov said that Russia’s largest producer of liquefied natural gas, Novatek, had not been given such instructions.

Putin on Wednesday said Russia would seek payment in rubles for gas sold to “unfriendly” countries after the United States and European allies teamed up to impose sanctions on Russia aimed at forcing its withdrawal from Ukraine.

The move was met with dismay in Europe and many companies said contracts with Gazprom stipulated that payment should be made in either euros or US dollars, not in Russian rubles.

Putin’s order to Gaxprom comes on the same day that the US and the European Union announced a push to boost supplies of liquefied natural gas to European countries by the end of 2022 in a bid to displace Russian gas.

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Under the agreement, Europe will get at least 15 billion cubic meters of additional LNG supplies by the end of the year, though it’s not clear where it will come from. Member states will also work to ensure demand for 50 billion cubic meters of American fuel until at least 2030. The aim is to work with international partners to help the continent wean itself off Russian gas, which accounts for about 40% of Europe’s needs.

“We’re coming together to reduce Europe’s dependence on Russian energy,” US President Joe Biden said at a joint press conference with European Commission President Ursula von der Leyen, who added that 15 billion cubic meters this year “is a big step in that direction.”

Europe is trying to diversify its energy sources in a bid to starve Russia of the revenues it needs to fund the war in Ukraine. But that’s a mammoth task. Russia ships about 150 billion cubic meters of gas to Europe via pipelines every year, and another 14 billion to 18 billion cubic meters of LNG. That means any disruptions to flows of pipeline gas from Russia would be hard to cope with.

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“It’s a start, but relatively small compared to the overall supplies from Russia,” said Jonathan Stern​, a research fellow at the Oxford Institute for Energy Studies. “All contributions will be welcome but the task is huge.”

The issue is critical as Russia is the EU’s biggest gas supplier.

The EU also relies on the country for the biggest share of its coal and oil imports, and has struggled to shift its energy policy away from Moscow.

The details of how the plan works is now in the hands of energy companies, with American LNG shippers and German buyers set to meet next week in Berlin to hash out possible deals.

With additional reporting from Bloomberg News

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