The Malta Independent 26 June 2022, Sunday

Putin's demand for ruble payments? No way! say EU nations; EU agrees on Russia sanctions so far

Associated Press Friday, 25 March 2022, 05:55 Last update: about 4 months ago

President Vladimir Putin's threat to have “unfriendly” countries pay for Russian natural gas exports only in rubles from now on got the not-so-friendly treatment from European Union nations Thursday.

“I don’t think anybody in Europe really know how rubles look like,” said Slovene Prime Minister Janez Jansa. “Nobody will pay in rubles.”

If others put it less bluntly, it came down to the same — from German Chancellor Olaf Scholz to Italian Prime Minister Mario Draghi, who as former chief of the European Central Bank, knows something about currencies.

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Early this week, Putin launched the idea that because of Western sanctions targeting the Kremlin and freezing Russian assets, they were "effectively drawing a line over reliability of their currencies, undermining the trust for those currencies.”

So instead of euros and dollars, Putin wants Russian rubles for Russian gas.

Economists said the move appeared designed to try to support the ruble, which has collapsed against other currencies since Russia invaded Ukraine on Feb. 24 and Western countries responded with far-reaching sanctions against Moscow.

Making such demands though, would fundamentally change contracts and render them null and void, several European leaders said during the first day of their EU summit.

“What we have learned so far boils down to the fact that there are fixed contracts everywhere, where the currency in which payment is made is also part of the contract," said Scholz. "Those are the starting points that we have to work from.”

Draghi simply said that if Putin pushed through the plan, “we consider it a violation of existing contracts.”

And considering the skyrocketing prices for gas, Belgian Prime Minister Alexander De Croo even saw possibilities in the proposal, though not the kind Moscow intended.

“In any case, if one element of a contract is changed, than we can talk about a whole range of issues, including the price,” De Croo said.

The Russian threat is potent since the EU imports 90% of the natural gas used to generate electricity, heat homes and supply industry, with Russia supplying almost 40% of the bloc's gas.

With the ruble in trouble because of the stringent economic sanctions, Putin would use any financial lift he can find. He instructed the country’s central bank to work out a procedure for natural gas buyers to acquire rubles in Russia.

But some analysts expressed doubt that it would work.

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The European Union preserved a sense of rarely seen unity through four rounds of unprecedented sanctions against Russia over its invasion of Ukraine. But at a summit Thursday, the 27 leaders faced division on the biggest issue of all: energy.

During the first month of war, EU nations imposed tough measures targeting Russia's economy and financial system as well as President Vladimir Putin and Russian oligarchs.

Unlike the U.S., they have so far spared Russian fossil fuels, highlighting the EU's reliance on the country's oil, natural gas and coal to keep homes warm and the wheels of industry turning.

“We are not at war with ourselves,” Belgian Prime Minister Alexander De Croo said at the summit in Brussels, where sanctions and energy were key topics. “Sanctions must always have a much bigger impact on the Russian side than on ours.”

He reflected the position of EU nations like Germany, Austria and the Netherlands. They are running up against other member states situated closer to Russia that want tougher action now.

"As long as we are purchasing energy from Russia, we are financing the war, and this is the big problem that we have,” Finland Prime Minister Sanna Marin said.

She was joined by Baltic leaders in demanding swift action.

“We have to continue to isolate Putin’s economy — Russia’s economy — to stop the money flowing into the war machine,” Latvian Prime Minister Krisjanis Karins told reporters. “The most logical place to move forward is in oil and coal.”

The EU imports 90% of the natural gas used to generate electricity, heat homes and supply industry, with Russia supplying almost 40% of EU gas and a quarter of its oil.

Instead of an embargo, the European Commission, the EU's executive arm, has proposed slashing the bloc’s dependency on Russian gas by two-thirds this year. The EU is in talks with the U.S. to ensure extra deliveries of liquefied natural gas and have also started discussions with other suppliers.

Speaking to the EU leaders via video, Ukrainian President Volodymyr Zelenskyy thanked them for working together to support Ukraine and impose sanctions on Russia, including Germany’s decision to block Russia from delivering natural gas to Europe through the new Nord Stream 2 pipeline. But he lamented that these steps were not taken earlier, saying there was a chance Russia would have thought twice about invading.

He then appealed to the EU leaders to move quickly on Ukraine’s application to join the bloc. “Here I ask you, do not delay. Please,” Zelenskyy said. “For us this is a chance.”

Maria Zakharova, spokeswoman for the Russian Foreign Ministry, said Thursday that European nations that don’t want to work with Russia on energy should “just tell their citizens who is destroying their prosperity and how. We will cooperate with those who are interested in ensuring their own energy security.”

High energy prices triggered by a supply crunch in Europe have for months triggered rising energy bills and prices at the pump, worsening as the war has jolted energy markets.

Last year, the EU’s imports of Russian goods were worth 158.5 billion euros, with mineral fuels accounting for 62%, or 98.9 billion euros, according to the European Commission.

Karins said the Ukraine war was a prime example where morals should trump money. Despite Latvia's “high dependency on Russian oil and gas,” businesses support a halt to trade in these goods, he said.

“They’re telling to me sanctions are a necessity because we have to stop Putin’s regime,” he said. “It’s just money. If you’re alive, if your infrastructure is fine, you can re-earn the money.”

Greenpeace has accused the European Union of bankrolling Russia’s war by continuing to purchase its energy supplies.

“Fossil fuels have a history of being connected with conflict and war — wherever they come from, governments must phase them out as quickly as possible, not look for new suppliers,” Greenpeace EU director Jorgo Riss said.

But Dutch Premier Mark Rutte signaled that EU countries were still too divided over the question of energy sanctions against Russia to produce an agreement on the matter at the summit. He stressed the four sets of sanctions that the EU has already imposed against Russia over the past month.

“We will discuss sanctions; I don’t think we will decide on sanctions,” Rutte told reporters. “Don’t forget that the sanctions package in place at the moment is by far the toughest package I’ve seen in my lifetime as a politician.”

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