IEA brands Russian demands for energy payments in rubles a security threat

Russian demands for its energy exports to be paid for in rubles would amount to a security of supply threat, International Energy Agency Executive Director Fatih Birol said March 24 at an IEA ministerial meeting.

Russian President Vladimir Putin made the demand that "unfriendly" countries pay for their gas imports in rubles on March 23 and suggested the measure could be widened to other commodities as well.

Deputy Prime Minister Alexander Novak said there should be a switch by oil importers from the dollar to alternative national currencies.

The announcements raised fears of new obstacles to purchasing Russian energy, prompting both oil and gas prices to spike.

Responding to what he called the "rumor" of the Russian demand, Birol told a news conference in Paris: "The rumor about the fact that Putin wants the importers to pay in rubles, if it is true, I would consider it as one of the other security threats made by Russia."

The Russian plans, not spelt out in detail, have prompted questions over how they would be implemented, particularly in the context of measures by the US and its partners to isolate Russia in response to the invasion of Ukraine, including sanctions on Russian banks.

Putin has given Russia's central bank a week to develop the new payment mechanism.

US Energy Secretary Jennifer Granholm, who chaired the IEA meeting, said plans to secure LNG for Europe would be announced by President Joe Biden shortly. She said that with the European Union the IEA was working on "actions to support Ukraine, stabilize the global energy market, and ultimately end our reliance on nations that weaponize fossil energy," the latter reference echoing earlier US criticism of Russia's now-stalled Nord Stream 2 gas pipeline project.

Analysts believe switching to the ruble could make paying for Russian gas more difficult.

The CEO of Poland's state-controlled PGNiG, Pawel Majewski, said March 24 gas suppliers were not able to unilaterally switch payment terms and ruled out paying for Russian gas in rubles.

"The contract ... provides for a method of payment. A contractor cannot freely change the way of paying payments," he said.

Slovenian Prime Minister Janez Jansa also said March 24 "nobody" would pay for Russian energy supplies in rubles.

There have been examples in the past of Russia selling gas to Europe in rubles.

In March 2019, Gazprom Export said it had made its first sale on its Electronic Sales Platform to a western European company priced in the Russian currency.

A total of 86 million cu m was sold -- including the ruble-priced sale of 80 million cu m for balance-of-month delivery to the German NCG hub -- in the ESP auction held on March 7, 2019.