Energy Companies Seeking Ways To Meet Putin’s Demand Of Ruble Payments

April 28, 2022

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By Cristian Bustos. Originally published at ValueWalk.

Russia cut gas supplies to Poland and Bulgaria for not bowing to Moscow’s demands for gas payment in rubles, sending a destabilizing effect on the European Union. Several companies are considering opening ruble accounts to pay Russia for energy in a move that could break the unity in imposing West sanctions on Russia.

Meeting Putin’s Demands

The president of the European Commission, Ursula von der Leyen, warned Wednesday that European energy companies that have contracts in euros or dollars should not meet Russian demands, as this would mean violating the sanctions against Moscow.

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“They should not agree to Russian demands. It would be a breach of sanctions and a high risk for companies,” Von der Leyen said at a brief press conference after Russian gas company Gazprom PAO (MCX:GAZP) cut off supplies to Poland and Bulgaria for refusing to pay in rubles.

The Financial Times reveals that gas distributors in Germany, Austria, Hungary, and Slovakia are already planning to open ruble accounts at Gazprombank in Switzerland to satisfy the Russian requirement.

This interest of several firms in making payments in rubles is giving wings to the Russian currency, which is already reaching highs not seen since November 2021. The ruble is already well above pre-war levels despite the sharp drop it suffered in the early days of the conflict.

Companies Weighing The Option

Companies weighing the ruble option include Uniper SE (ETR:UN01), in Germany, and Vienna-based OMV, while other big European buyers have intensified talks with Gazprom as payment deadlines draw closer.

Italian state-owned Eni SpA (BIT:ENI), another of Gazprom’s big clients, is weighing its options. According to Reuters, the Rome-backed company has until the end of May to make a final call.

The Hungarian government has confirmed that it will use the payment system launched by Russia to pay for oil and gas imports in rubles, with the Hungarian Foreign Minister, Peter Szijjarto highlighting that “85% of the gas supply” and “65% of the oil supply” come from Russia.

It must be remembered that all these movements are taking place after the Russian government signed a decree establishing that payment for the Russian gas pipeline supplied from April should be made exclusively in rubles.