Germany rejects Russian demand to pay for gas in rubles

German Chancellor Olaf Scholz attends a G7 meeting at the NATO headquarters in Brussels, Belgium, Thursday, March 24, 2022. As the war in Ukraine grinds into a second month, President Joe Biden and Western allies are gathering to chart a path to ramp up pressure on Russian President Vladimir Putin while tending to the economic and security fallout that's spreading across Europe and the world. (Michael Kappeler/DPA via AP, Pool)
By Dénes Albert
3 Min Read

German Chancellor Olaf Scholz rejected on Thursday a Russian demand to ask payment in rubles for its gas deliveries to Europe, a move widely seen as an attempt to prop up the country’s currency faltering under the weight of the sanctions.

“We have looked at the gas purchase contracts and it is fixed that we have to pay for it in euros or dollars and that is what matters,” Olaf Scholz said.

At a press conference at the G7 summit in Brussels on Thursday afternoon, Scholz said: “We will keep the sanctions alive for as long as necessary and we will continue to assess their effects.”

Besides Germany, other nations, such as Italy have also signaled they will refuse to pay in rubles.

“It’s a contract violation, and contracts will be considered violated if Russia implements this condition,” said Italian Prime Minister Mario Draghi said.

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It is unclear how Putin will respond to the refusal from both Germany and other countries. Russia is unlikely in a mood to honor contracts given that its foreign currency reserves have been seized across Europe along with other assets in what the country views as a direct attack.

Scholz’s government has turned to the United States and Canada, along with autocratic nations such as Qatar and the UAE, to replace Russian gas and oil, but it is unclear how quickly this can be accomplished

“These are difficult times, especially for Ukrainian citizens who are experiencing how their lives have been ruined in recent weeks. We show solidarity with the Ukrainian people and those who fight bravely against the aggressor deserve respect,” Scholz said.

Scholz said Ukrainian President Volodymyr Zelensky had informed them of the current state of the war. He then reiterated the G7’s demand that Russian troops leave Ukraine:

“Russia has fundamentally violated the post-world war international system with the outbreak of war against Ukraine. We call on the Russian president to agree on a ceasefire without delay and to order humanitarian corridors to evacuate the civilian population.”

Russian President Vladimir Putin on Wednesday instructed his government, and in particular the state-owned Gazprom group, which oversees natural gas contracts and deliveries, to stop accepting payments in dollars or euros in the future from “unfriendly” countries such as Germany and Great Britain.

This effectively means these governments would have to purchase rubles with their own currency. Many European countries are wary of sanctioning Russian oil and gas, fearing a catastrophic rise in inflation and an industrial slowdown.

Russia provides approximately 45 percent of the EU’s natural gas demands, and for countries like Germany, Hungary and Bulgaria, this gas is vital to keeping the lights on.

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