Germany has some advice for the Russian President Vladimir Putin: think about the consequences of asking for energy payments in rubles.
Last week, Putin of Russia said that “unfriendly” countries would be required to pay for their natural gas in rubles – sending European gas prices soaring.
By demanding payment in Russian currency – not in dollars or euros, as contracted – Putin is seeking to raise the value of the ruble, which sank after Russia’s invasion of Ukraine. . The U.S. dollar up nearly 13% against the Russian ruble since February 24, when Russia began its invasion of Ukraine, after skyrocketing about 85% in early March.
However, German Finance Minister Christian Lindner said he would not be heavily armed against Russia’s demands.
“We are absolutely against any form of blackmail. These treaties are based on the euro and [U.S.] dollar and so we ask private sector companies to pay [Russia] in euros or dollars,” Lindner told CNBC’s Annette Weisbach on Monday.
He added: “If Putin is not willing to accept this, he can think about the consequences.
German Chancellor Olaf Scholz said last week that paying for oil in rubles would be a breach of contract, and Italian officials also said they would not pay in rubles because doing so would help Russia avoid potential penalties. Western sanctions for the invasion of Ukraine.
However, tensions over future payments could disrupt the ongoing flow of natural gas from Russia to Europe. The region receives about 40% of its gas imports from Russia, and this figure is even higher for some European countries, especially Hungary.
The region’s reliance on Russian energy has prevented the bloc from imposing an oil embargo on Moscow as part of a sanctions regime – vice versa. The White Housebanned imports of Russian oil and gas.
The European Union has said it would overhaul Russia’s approach to energy and reduce its age-old dependency. A plan released earlier this month proposes cutting Russia’s gas imports by two-thirds before the end of the year.
“We will find solutions. We are working to be less dependent on Russian imports and if [Putin] decided to cut off his supply, we will have to go even faster to be independent from Russia,” Lindner said.
The region is currently scrambling for energy from elsewhere. For example, the United States on Friday announced a new agreement with the European Union to supply the bloc with 15 billion cubic meters of liquefied natural gas this year.
