G7 rejects Russia’s request to pay for gas in rubles – Action News Jax

BERLIN — (AP) — Major economies in the Group of Seven agreed on Monday to reject Moscow’s request to pay for Russian natural gas exports in rubles.

German Energy Minister Robert Habeck told reporters that ‘all G-7 ministers fully agree that this (would be) a unilateral and clear breach of existing contracts’ for natural gas , which is used to heat homes, generate electricity and power industry. .

The energy ministers of France, Germany, Italy, Japan, the United States, the United Kingdom and Canada, as well as the energy commissioner of the European Union, met by videoconference and reaffirmed that contracts “must be honored”, with most stipulating that payments are made in euros or dollars, according to a G-7 statement.

“Payment in ruble is not acceptable, and we will ask the companies concerned not to follow (Russian President Vladimir) Putin’s request,” Habeck said.

Putin announced last week that Russia would now require “unfriendly” countries to pay for natural gas only in Russian currency, instructing the central bank to devise a procedure for buyers to acquire rubles in Russia. Demand has pushed already high gas prices even higher amid fears it could be a prelude to a natural gas cut, which could disrupt Europe’s economy and hurt Russia’s finances.

Economists said the move appeared designed to try to prop up the rouble, which has slumped against other currencies since Putin invaded Ukraine on Feb. 24 and Western countries responded with sweeping sanctions against Moscow. But some analysts have expressed doubts that it would work.

Asked by reporters earlier on Monday whether Russia could cut off natural gas supplies to European customers if they rejected the request to pay in roubles, Kremlin spokesman Dmitry Peskov said on a conference call. that “we are clearly not going to provide gas for free”.

“In our situation, it is hardly possible and feasible to engage in charity work for Europe,” Peskov said.

Asked what would happen if Russia turned off the taps now, the German energy minister replied: “We are ready for all scenarios.”

“Putin’s request to convert the contracts into rubles (means) that he stands with his back to the wall in this regard, otherwise he would not have made this request,” Habeck said, adding that Russia needs rubles for finance his war at home. , such as payments to troops.

European governments have been reluctant to impose a ban on energy imports from Russia for fear of the impact it would have on the economy. Europe gets 40% of its gas and 25% of its oil from Russia and since the war has been quick to draw up proposals to reduce its dependence. Russia is equally dependent on Europe, with oil and gas being its dominant sector and paying for the government.

Estimates of the impact of a gas boycott or embargo in Europe vary, but most involve a substantial loss of economic output, especially as war and soaring energy prices and resulting raw materials are already weighing on the European economy. US sanctions allow exceptions for oil and gas payments, although they themselves have banned imports of Russian energy.

Putin’s ruble payment proposal has led Germany’s utility association, BDEW, to call on the government to declare an “early warning” of an energy emergency.

A spokeswoman said on Monday the government saw no need for an early warning statement at this time.

Pressed by reporters to make the statement, German Chancellor Olaf Scholz said that “the contracts we know provide for the euro as the currency of payment and companies will pay according to the contracts they have signed”.

Which currency is used to buy Russian energy “doesn’t really matter,” said Robin Brooks, chief economist at the Institute of International Finance, a trade group for the world’s banks.

“What matters is that energy exports give Russia purchasing power, which it can convert into goods from abroad,” she said.

Putin’s demand for payment in rubles “is mostly window dressing. It doesn’t change the underlying transactions,” Brooks said. “At the margin, I would call this another Putin ‘own goal’ because it puts more emphasis on gas purchases by Western Europe and could potentially increase the chances of an import shutdown. “

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AP Economics Writer Paul Wiseman contributed from Washington.

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