President Vladimir Putin said on Wednesday that Russia would start sending invoices to European gas buyers in rubles, in a move that raised natural gas prices and increased the Russian currency.
“The collective West has killed all confidence in their currencies,” Putin added when announcing the move. Moscow will implement “in the shortest possible time” means for transmitting invoices for the supply of natural gas to the ruble for “supposedly unfriendly countries,” he said.
TTF-related gas futures, Europe’s wholesale gas price, jumped 18% on Wednesday to 117 euros per mega watt hour, almost seven times more than a year ago.
But the announcement has left commodity traders in a hurry to understand its full implications for making payments and most importantly – pricing.
“This shows Russia’s greater willingness to jeopardize its gas agreements in light of its political confrontation with the West,” said James Waddle, head of European gas at Energy Aspects, a consulting firm.
Analysts said changes in the payment currency apparently created significant practical difficulties for Russian gas importers in Europe. Putin gave the central bank and the government a week to find a way to allow buyers to buy rubles in the local market.
But the Kremlin statement suggested that Russia would not change the basic terms of the contracts, which could fundamentally change the prices buyers have to pay.
Contracts for the export of gas pipelines to Russia are usually denominated in euros, but most of them already include the option to pay in rubles.
“The market is worried about this,” said James Huxtap, director of gas analysis at Emea at S&P Global. “This is new territory but the plans are relatively vague at this stage. It is definitely a risk factor and complication production for Russian gas buyers in Europe.”
The ruble has risen nearly 6 percent against the dollar to its highest level since March 18, according to Bloomberg data.
Putin said: “It does not make sense to supply Russian goods to Europe and get their goods in their currency. There will be a shift of gas payments to the ruble.”
Gazprom, the Kremlin-controlled gas supplier, declined to comment.
The change will only deal with the payment currency, Putin added. He stressed that Russia will continue to supply natural gas according to volumes and prices agreed in existing contracts.
“Unlike some of our colleagues, we value our business reputation as a reliable partner and supplier,” he said.
This month, gas prices in Europe jumped to more than 300 euros per megawatt hour, before falling back below 100 euros.
Moscow has restricted local foreign currency conversions after its central bank fell under Western sanctions.
Russia to switch gas invoicing to roubles for European buyers Source link Russia to switch gas invoicing to roubles for European buyers