A key question that has been on the minds of Europe for months now is whether Russia will agree to supply Europe with a discounted rate if it can get paid in a currency other than the ruble. Russian gas accounts for roughly 45 per cent of the EU’s gas imports and is the primary source of revenue for the Kremlin. Germany has activated emergency measures to avoid gas shortages and ration supplies.
A group of G7 energy ministers rejected Russian President Vladimir Putin’s demand for payment in rubles for Russian gas. German Economy Minister Robert Habeck said that a demand from Putin to have countries pay for gas exports in rubles is unacceptable. The G7 countries urged companies not to comply with the Russian president’s demand because it could lead to divisions within the group.
European Union Energy Commissioner Eric Mamer said that the G7 nations overwhelmingly rejected the Russian government’s demand to pay for Russian gas in rubles. In a videoconference, Habeck and his counterparts in the G7 countries agreed to reject the Russian demand. The demand prompted higher prices of natural gas and sparked fears of an outage of Russian gas that could harm Europe’s economy and its own finances.
According to the G7, Russia will try to find a way to accept rouble payments, although European countries can refuse to accept them. If the EU does not accept payments in rubles, it will be forced to source alternative sources of gas. By the end of March, the Russian central bank will present its proposals to Putin. If the G7 fails to respond, Russian gas supplies will cease.
Despite the fact that the EU is not yet willing to impose an energy embargo against Russia, it has decided to reduce its imports of Russian gas by two-thirds this year. But the G7’s move is not without controversy. As a result, Russia has been unable to attract international investors after the news of its Russian invasion. A spokesman for the US State Department said that the demand for Russian gas payments shows how desperate the Russian government is. Moreover, Russia has already forced exporters to convert 80 per cent of their revenue to rubles, while the Central Bank of Russia recently reported a decrease of its reserves between February 18 and March 25.
Germany’s response was swift and decisive: the country has chosen to reject the Russian president’s demand for a ruble payment for Russian gas. The move will put Germany on track to wean itself off Russian oil and gas. However, it must be careful not to take any rash steps that could put the entire region into recession. So far, Germany has resisted calls to impose an embargo and has remained defiant.