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Russia’s Gas Supply to Europe at Risk as Ruble Deadline Nears

Russia to present rouble payment mechanism on Thursday Europeans states, G7 reject Russian rouble demands European gas prices rise on supply concerns
An employee in branded jacket walks past a part of Gazprom's Power Of Siberia gas pipeline at the Atamanskaya compressor station outside the far eastern town of Svobodny, in Amur region, Russia November 29, 2019. REUTERS/
An employee in branded jacket walks past a part of Gazprom’s Power Of Siberia gas pipeline at the Atamanskaya compressor station outside the far eastern town of Svobodny, in Amur region, Russia November 29, 2019. REUTERS/

Russia said it would work out practical arrangements by Thursday for foreign companies to pay for its gas in roubles, raising the probability of supply disruptions as Western nations have so far rejected Moscow’s demand for a currency switch.

President Vladimir Putin’s order last week to charge “unfriendly” nations in roubles for Russian gas has boosted the currency after it fell to all-time lows when the West imposed sweeping sanctions against Moscow over its invasion of Ukraine.

“No one will supply gas for free, it is simply impossible, and you can pay for it only in roubles,” Kremlin spokesperson Dmitry Peskov told reporters on Tuesday.

The speaker of Russia’s upper house of parliament, Valentina Matviyenko, said Moscow was ready if Europe refused to buy Russian energy and could redirect supplies to Asian markets among others, TASS news agency reported.

European countries, which mostly pay in euros, say Russia is not entitled to redraw contracts. The G7 group of nations rejected Moscow’s demands this week.

European wholesale gas prices made further gains this week on concerns supplies could stop, although Russia has so far met contractual obligations for gas sales to Europe. read more

Peskov said that, in line with a March 31 deadline set by Putin for the rouble payments, “all modalities are being developed so that this system is simple, understandable and feasible for respected European and international buyers.”

G7 countries urged companies not to agree to rouble payments and said most supply contracts stipulated euros or dollars.

“That’s a position that we share,” a European Commission spokesperson told a news conference in Brussels on Tuesday.

The European Commision said last week it was assessing scenarios that included a full halt to Russian gas supplies next winter, as part of its contingency planning for supply shocks.

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