Russian President Vladimir Putin has played his trump card in response to Western sanctions, declaring that “unfriendly” countries that wish to purchase Russian gas will have to pay in rubles. The plan would force Russia’s rivals to prop up its currency and negate their own sanctions. Europe is heavily reliant on Russian gas and has no available alternative, so options within the European Union are limited as countries plan their response to the announcement.
European countries told to pay in rubles
Putin announced that the decision will be put into practice as soon as possible for countries that have earned a place on the “unfriendly” list by imposing sanctions on Russia.
The ruble leapt in value after the announcement, though it hasn’t returned to its pre-war value. Gas prices also shot up after the plan was announced.
If European countries cooperate they will have to buy rubles to pay for their gas, thus driving up the value of the ruble and reversing much of the damage inflicted to the currency by sanctions.
Europe reacted nervously to the announcement, with some major importers saying that they would be able to keep Russian gas coming if necessary and others arguing that the decision contradicts their existing contracts.
Paying in rubles certainly isn’t what they agreed to in those contracts, but Moscow clearly feels that the sanctions imposed on Russia were an invitation to hit back and ignore previous agreements.
Putin stressed that the only change to its deals with importers would be the currency used for payments, otherwise Russia intends to keep up its sales of gas to Europe.
Putin makes another gamble
Europeans are protesting the decision, but one side will have to back down. Importing nations could simply stop paying for Russian gas, which would make Putin’s plan backfire disastrously.
Unfortunately for the Europeans, this is effectively impossible unless they are willing to see their economies grind to a halt. Even if someone else was capable of taking Russia’s place, the infrastructure doesn’t exist to facilitate a shift to another source.
If Europeans want to keep their economies going they will have no choice but to prop up Russia’s economy at the same time, undermining their own sanction efforts and enabling Putin to keep up the war in Ukraine.
Europe has become addicted to Russian gas and now Putin is threatening to cut off the supply if “unfriendly” nations do not help Moscow evade damaging sanctions.
The move must have been part of Putin’s plan for limiting the economic fallout that would inevitably follow his invasion.
Unless Germany, Italy, and other Western countries are prepared to endure economic chaos and an extreme fuel shortage, cooperating with Russian demands will be almost unavoidable.
