We should pay for Russian gas in euros, not rubles. This is how Francesco Giavazzi, the government’s economic adviser, comments on Russian President Vladimir Putin’s call for payments in euros and dollars to be rejected. In fact, the Russian leader has announced that Moscow will no longer accept the currencies of enemy countries. The only currency accepted for paying for the precious raw material is the ruble. Putin explained that freezing Russian assets in the context of Western sanctions destroyed Moscow’s confidence. The Kremlin leader added that the innovation only affects the currency of payment and not the content of the contracts (and thus the volumes of gas supplied), which would therefore remain unchanged.
Specifically, Putin has ordered the government to issue a directive requiring Russian gas giant Gazprom to convert into rubles supply contracts with countries that have activated sanctions against Moscow. Among them, Italy is already threatened by the Russian head of state with “irreversible consequences on the economic and energy front. I have decided to implement a number of measures, Putin said at a meeting with government officials, to transfer payment for our gas supplies to enemy countries in Russian rubles. Putin then ordered the amendments to be enacted as soon as possible. It will take several days for Gazprom to technically implement the changes.
Moscow’s decision to convert gas contracts into rubles was intended to restore the strength of Russia’s currency, which collapsed after the invasion of Ukraine and sanctions imposed on the country by the European Union and the United States. After Putin’s announcement, the ruble has effectively appreciated on the Moscow Stock Exchange. The euroruble exchange rate rose quickly from 112 to 107, while the dollarruble slipped from 103 to 97.75. All this while the gas price in Europe recorded a 34% jump. In his speech to officials, Putin reaffirmed the illegality of Western sanctions. Sanctions that include freezing the Central Bank of Russia’s foreign exchange reserves. Indeed, Putin would add: Some Western countries have taken unlawful decisions to freeze Russian assets.
The reactions in Europe and in Italy
Immediate reactions to Putin’s announcement in Italy and Europe. After repeating that the government had not yet made a decision on the matter, Giavazzi added: Being paid in rubles would be a way to circumvent the sanctions, so I think we will continue to pay in euros. Relations between Moscow and the EU then threaten to deteriorate, also in view of the new sanctions being discussed in Brussels, where NATO, G7 and European Union summits are expected. One of the possibilities is the import ban on Russian oil and gas already decided by the United States. The clear Italian line. Says Economic Development Minister Giancarlo Giorgetti: a race for Europe to emancipate itself from Russian gas as quickly as possible. If we manage to emancipate ourselves from Russian gas, Putin will need time. Federal Economics Minister Robert Habeck also interfered in the issue of payments, according to which Putin’s demand to receive payments in rubles constituted a breach of contract. We will now discuss with our European partners how to react, he concluded.