Exploiting EU Divisions Over Energy Sanctions, Putin Says Future Gas Contracts Must Be Ruble-Based

James Carstensen | March 23, 2022 | 7:38pm EDT
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Russian President Vladimir Putin. (Photo by Sergei Ilyin / Sputnik / AFP via Getty Images)
Russian President Vladimir Putin. (Photo by Sergei Ilyin / Sputnik / AFP via Getty Images)

Berlin (CNSNews.com) – As the European Union grapples with how to wean itself off Russian energy supplies, President Vladimir Putin announced on Wednesday that Russia from now on would only accept payment from “unfriendly” countries for its gas in its own troubled currency, the ruble.

“It makes no sense to supply Russian goods to Europe and get their goods in their currency,” Putin said during a cabinet meeting. “There will be a switch of gas payments to rubles.”

The move effectively confronts countries like Germany with a choice between ending the purchase of Russian natural gas now – something Berlin has said it cannot do immediately – and breaking sanctions by trading euros for rubles.

Transactions would be banned under sanctions imposed by the E.U. on February 28 against Russia’s state-owned Central Bank, as part of its response to Russia’s invasion of Ukraine.

Putin’s statement came hours after German Chancellor Olaf Scholz reiterated in remarks to lawmakers that the country cannot immediately stop buying Russian oil and gas.

“We will end this dependence as quickly as we can, but to do that from one day to the next would mean plunging our country and all of Europe into a recession,” he said.

Jacob Kirkegaard, a senior fellow at the German U.S. Marshall Fund, said that Scholz’s decision not to end Russian supplies now was a mistake that Putin was able to exploit with his ruble maneuver.

“Chancellor Scholz, in my opinion, made a terrible strategic move by ruling out energy sanctions because he basically invited this action by Putin,” he said. “Now, either he’s going to have to break existing sanctions [by dealing in Russian currency] or he’s going to have to do what he didn’t want to do before, namely, stop – or de facto stop – energy exports.”

“Putin is basically forcing Germany to choose between potentially getting no gas or breaking the sanctions,” Kirkegaard said.

The search for alternatives to Russian energy supplies is expected to feature at a meeting of E.U. leaders in Brussels on Thursday and Friday. President Biden is scheduled to address the meeting.

“It is clear that our dependency, of the European Union, on Russian fossil fuels also puts Europe’s energy security in danger,” E.U. Commission president Ursula von der Leyen said in a joint statement Wednesday with Canadian Prime Minister Justin Trudeau.

“We have to get rid of our dependency on Russian fossil fuels.”

Von der Leyen said the E.U. will discuss potential Canadian energy supplies to Europe, and she will also discuss with Biden prioritizing deliveries to Europe of U.S. liquefied natural gas (LNG) “in the coming months.”

According to the International Energy Agency, the E.U. in 2021 relied on Russia for about 45 percent of its total gas imports and almost 40 percent of its total gas consumption.

That dependency has prevented the bloc from cutting purchases from Russia completely, despite calls from some members to do so. A meeting of E.U. foreign ministers on Monday was unable to agree on sanctioning Russia’s energy sector.

Lithuanian Foreign Minister Gabrielius Landsbergis said Monday it was necessary to discuss sanctioning Russian energy, even though the Baltic country imports some 87 percent of its gas and 66 percent of its oil from Russia, according to the Moody’s rating agency.

Tony Alexiou, principal at international geopolitical risk assessment firm The Minotaur Group, said a move to European energy independence was still a long way off.

“Over the course of years, Europe has become quite dependent on Russian fuel and unfortunately there have been few fail-safes and backups put in place. It will take years for that to be undone,” he said.

“Green energy, as sexy as it sounds, is not developed enough yet to be able to act as a full replacement for fossil fuels – not at the scale that Europe needs it,” Alexiou said. “Switching to [LNG] is not a great substitute, but one that will work in a pinch.”

In the shorter term, he said, some countries will likely need to fire up old nuclear plants, while the bloc focuses on searching out new suppliers and also invests heavily in green energy for the longer term.

“Russia knows how much Europe relies on its resources and knows that there will not be a complete rejection of Russian fuel from Europe in the short or mid-term,” Alexiou said. “It’s not possible.”

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