Status: 01.04.2022 12:32 pm

Starting today, Western buyers will have to pay for their gas from Russia through special accounts at Gazprombank, according to an order issued by Putin. Much still seems unclear about the measure.

By Till Bücker, tagesschau.de

Russian President Vladimir Putin has caused a lot of confusion with his decree that Russian gas must now be paid for in rubles. However, the affected customers from “unfriendly states” may continue to pay in euros and dollars. Even the former president of the European Central Bank (ECB), Mario Draghi, is not entirely clear how the new modalities will work.

What has Putin decreed?

Payments for deliveries of Russian natural gas are to be made in rubles from today, according to the decree signed yesterday. Western buyers are thus obliged to open a special ruble account and a special foreign currency account with Gazprombank. No representative of the customer needs to be present for this. Accordingly, companies in the EU can continue to settle their gas invoices in euros or dollars.

Nevertheless, much still seems unclear. “What I understood – but I may be wrong – is that the conversion of payment is an internal matter of the Russian Federation,” ex-central banker Draghi, for instance, said yesterday after a phone call with Putin. The Kremlin chief had stressed that this was a “concession” to European companies and states.

German Chancellor Olaf Scholz had also already assured Putin of the payment in euros on Wednesday. Last week, on the other hand, he had still announced that customers would have to pay in rubles in the future. The G-7 states had firmly rejected this.

What is the payment procedure now?

The payment procedure is described in point 6 of the decree. According to it, the foreign customer should first transfer the money to the special currency account of type “K” in the foreign currency specified in the natural gas supply contract – that is, in euros or dollars. Gazprombank in Luxembourg then sells the currency on the Moscow exchange on the instructions of the gas customer and credits the proceeds in Russian rubles to the special currency account.

In a further step, the rubles finally end up in the Russian supplier’s account. Only then is the payment considered complete.

What happens if the money does not arrive in rubles?

“If such payments are not made, we consider this to be a default on the part of the buyers, with all the resulting consequences,” Putin explained. “Nobody sells us anything for nothing, and we will not do charity – that is, existing contracts will be stopped.”

So is there a threat of an end to gas supplies?

For now, that is unlikely to be the case. Because nothing apparently changes for Western companies – except that they have to open a new account with Gazprombank. Even on the day of the ordered changeover of gas payments, Russia, according to its own information, continues to supply the raw material in large quantities for transit through Ukraine to Europe.

Today, 108.4 million cubic meters of gas were being pumped through the pipeline system, the spokesman for energy giant Gazprom, Sergei Kupriyanov, told the Interfax agency. This corresponds to almost the contractually possible volume of gas.ical maximum capacity utilization per day.

What are the consequences of the change for German companies?

The exact effects of the changed modalities are still unclear due to the vague and short-term reports. Analysts in Moscow assume that the system will not take full effect until April and May. However, experts do not expect the changes in gas billing to mean major consequences for German companies. “For German companies, the bottom line is unlikely to change very much,” said Ulrich Leuchtmann, head of the foreign exchange department at Commerzbank.

Expert Ulrich Wortberg of Landesbank Hessen-Thüringen takes a similar view: “Ultimately, there will be little change to the current payment method if the consumer countries continue to pay their gas bills in their national currencies and a Russian bank exchanges the foreign currency into rubles.”

What are the benefits for Russia?

According to Putin, Russia wants to “strengthen its financial and economic sovereignty” with the move. However, Janis Kluge, an expert at the German Institute for International and Security Affairs (Stiftung Wissenschaft und Politik), said at the beginning of the week in an interview with tagesschau.de that there would be little economic change for Russia. This is because Gazprom and Rosneft had already been obliged by the Russian Central Bank to exchange 80 percent of the revenues from energy deliveries into rubles within three days. “Thus, demand for the currency is created, and it is strengthened,” Kluge said. Whether the ruble will now be supported even further is questionable.

Economist Marcus Keupp, on the other hand, assessed the measure as a currency intervention to support the ruble exchange rate. But since payments can continue to be made in dollars and euros, “it seems less dramatic than initially portrayed,” the lecturer in military economics at the Military Academy (MILAK) at ETH Zurich told tagesschau.de.

Financial experts have another theory: since the Russian central bank is largely isolated by the sanctions, Moscow may want to build Gazprombank as a central gateway to Western finance. “It seems as if the Kremlin wants to build Gazprombank into a kind of quasi-central bank,” foreign exchange expert Leuchtmann told the “Süddeutsche Zeitung.”

How are politicians reacting?

The German government first wants to examine the Russian government’s demands in more detail. “When we have the decree, the German government will thoroughly examine and evaluate it,” a spokeswoman for the Economics Ministry said yesterday after the decree was published. “What is clear is that Germany will continue to pay in euros. We will not change anything about that, the G7 decision applies.”

Chancellor Scholz also reiterated that gas supplies from Russia should be paid in euros. “In any case, it applies to the companies that they want to, can and will pay in euros,” he said in an initial reaction.

And what do the companies themselves say?

The major German customers of Russian gas giant Gazprom were initially cautious. “We have seen the notifications and the decree in Russian, but need the time to translate and check,” said a spokesman for energy company Uniper, for example.

Similar comments were made by the head of the German Association of Energy and Water Industries (BDEW), Kerstin

Andreae: “We share Chancellor Scholz’s view that the procedure should first be described very clearly before further decisions are made.”

In addition, he said, unity within the EU and with the G7 countries on this issue should be kept in mind. “The contracts are currently in euros or dollars. And the energy industry assumes that this will continue to apply,” Andreae added.

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