ITV News Economics Editor Joel Hills reports on President Putin's ultimatum
“Unfriendly countries” must start paying for Russian gas in rubles, or their supplies will be cut, Moscow has said.The decree, published on Thursday by state media, came a day after the leaders of Italy and Germany said they received assurances from President Vladimir Putin. Mr Putin talked tougher, saying that starting from Friday, Russia will start accepting ruble payments for Western countries that imposed sanctions over its invasion of Ukraine. He said contracts will be stopped if buyers don’t sign up to the new conditions, which include opening ruble accounts in Russian banks.
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European leaders had previously rejected paying for deliveries in rubles, saying propping up the Russian economy would undermine sanctions imposed because of the war in Ukraine. The decree President Putin signed was published by state news agency RIA Novosti, and says a designated bank will open two accounts for each buyer, one in foreign currency and one in rubles. The buyers will pay in foreign currency and authorise the bank to sell that currency for rubles, which are placed in the second account, where the gas is formally purchased.
Boris Johnson's office has said Russia's conditions showed “the impact that our sanctions are having on the Russian economy”. Asked if there were any circumstances in which the UK would pay for gas in rubles, the PM's spokesperson said “that’s not something that we will be looking to do. “There are no gas pipes directly linking the UK with Russia, our imports from Russia made up less than 4% of total UK gas supply in 2021, so we are obviously less reliant on it than many of our European partners.”
Speaking shortly after President Putin’s announcement, German chancellor Olaf Scholz said gas contracts stipulate payment mostly in euros and sometimes in dollars. He said he made clear to Putin in a phone call on Wednesday “that it will stay that way.” “What his ideas are for how this can happen is what we will now look at closely,” Chancellor Scholz told reporters in Berlin.
“But in any case, what goes for companies is that they want to and will be able to pay in euros.”
Other western officials have said they are sceptical about Russia's threat to tear up gas contracts.
Their view is that it is very difficult for Russia to stop selling to the West, as it cannot replace the same level of sales by turning eastwards, for example to China.
Joel Hills explains the significance of Russia's gas announcement
In its latest raft of measures, the UK imposed sanctions on more than a dozen Russian media figures and organisations accused of spreading propaganda and disinformation about the war in Ukraine.
The US also imposed fresh sanctions on Thursday. This time, it targeted Russia's technology sector. And in a bid to reduce the US' gas prices - which have rocketed in part due to the Ukraine war - President Joe Biden ordered the release of 1 million barrels of oil per day from the nation’s strategic petroleum. This will last initially for six months.
President Biden also urged American gas companies that are making huge profits to increase production. He announced a "use-it-or-lose-it" policy, where companies will be charged for unused wells.