BREAKING: Russia’s Gazprom Stops Deliveries of Russian Gas to Germany via Yamal-Europe Pipeline

  • Russia Throws Down the Gauntlet, left Germany scrambling today after Putin and Russia cut off gas supply on Saturday.
  • This comes a week after Vladimir Putin demanded European nations start purchasing Russian gas in rubles.

Via Clever Tactics, Putin Gets His Way On Rubles-For-Energy Demand 

  • Some reports say Putin backed down on his demand for rubles for energy. Those reports are essentially wrong.

  • Understanding Putin’s Clever Tactic:
  • Russian president Vladimir Putin demanded rubles for energy. His concern was that new EU sanctions would freeze euro-denominated accounts of Russian energy suppliers.
  • One of Putin’s fears stems from the fact that payments for gas shipped in April get paid later in the month or in May, depending on the contract. A second fear is European sanctions on Gazprombank.
  • The EU said NO to his demand. Yet, the gas will still flow. This prompted misguided reports that “Putin backed down.”
  • What’s Really Happening?
  • German Chancellor Olaf Scholz agreed to Vladimir Putin’s clever way around the problem of rubles payments.
  • The EU will pay in euros and via a separate account at Gazprom, the euros are immediately converted to rubles.
  • Putin Says Russia to Keep Supplying Gas Amid Shift to Rubles

When Putin first announced the ruble-payment demand last week, European officials rejected it, saying the move would violate contract terms. But the Kremlin Thursday published a presidential decree outlining the mechanism to allow foreign buyers to convert their dollars and euros into the Russian currency through a state-controlled bank.

The Kremlin decree mandates that deliveries starting from April 1 be paid for in rubles. Foreign buyers need to open special ruble and foreign currency accounts at Gazprombank to handle payment, which can be done remotely. Buyers transfer foreign currency into their accounts, Gazprombank converts the funds to rubles on the Moscow Exchange and transfers rubles into the buyer’s ruble account for payment to Gazprom. The payment is considered complete when the rubles reach Gazprom’s account. 

  • The impact on the ruble is limited because Russian corporations are already required to sell 80% of their foreign-exchange earnings for rubles under the capital controls imposed by Western nations after Russia invaded Ukraine.
  • This new maneuver means energy suppliers will have to sell 100% of euros and dollars to the Russian central bank for rubles.