Hungary sides with Russia on gas payments
Vladimir Putin has gambled on a threat to cut energy supplies in response to sanctions
Hungary has broken ranks with the EU by saying that it is willing to yield to Russian demands to pay for gas with roubles.
Vladimir Putin last week signed a decree saying that “foreign buyers” must pay for gas supplies using Russia’s currency, Reuters reported, warning that “contracts would be halted if these payments were not made”.
The Russian president said in a televised address: “In order to purchase Russian natural gas, they must open rouble accounts in Russian banks… Nobody sells us anything for free, and we are not going to do charity either. Existing contracts will be stopped.”
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Moscow supplies “about a third of Europe’s gas”, the news agency said, meaning “energy is the most powerful lever at Putin’s disposal” in response to biting Western sanctions.
Russian cash for Russian gas
Putin’s demand that countries buy gas using roubles has been interpreted as “an attempt to boost the rouble, which has been hit by Western sanctions”, the BBC said.
The decree means foreign buyers will “have to open an account at Russia’s Gazprombank and transfer euros or US dollars into it”, the broadcaster explained. The bank will then “convert this into roubles which will then be used to make the payment for gas”.
BBC economics editor Faisal Islam said that the measure was intended to be seen as “a dramatic escalation in the economic battle between the West and Russia over the invasion of Ukraine”.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Putin essentially “outlined a pathway for the cutting of gas supplies to Europe if Western customers refuse to pay for supplies in the Russian currency the rouble”, he added. But Russia ultimately “still needs the money for the gas, and still wants to leave the possibility of a market for its main export once a peace deal is signed”.
Hungary, which has long-standing economic and political ties to the Kremlin, yesterday became the first country to publicly state that it would go along with the decree. Fresh from his election victory, Prime Minister Viktor Orbán told a press conference: “It causes us no problem… so if the Russians request it, we will pay in roubles.”
Orbán is “one of Russia’s closest EU allies and his stance is markedly different from other European importers of Russian gas”, the Financial Times said. Germany, in particular, has already said it is ready for “supply interruptions and might have to ration gas if Moscow shut off or delayed shipments”.
But the Hungarian prime minister’s stance is a “challenge to the EU’s rejection of Putin’s attempts to shift the terms of energy contracts”, the paper added, especially as he comes under “increasing pressure” from his EU allies to loosen his ties with Moscow.
‘Energy trolling’
Moscow is currently “working out methods for accepting payments for its natural-gas exports in rubles”, Radio Free Europe (RFE) reported, and has said “it will make decisions in due course should European countries refuse to pay in the Russian currency”.
Kremlin spokesperson Dmitry Peskov said last week after Putin’s televised address: “We are not going to supply gas for free, this is clear. In our situation, it is hardly possible and appropriate to engage in charity” with European buyers.
But as it stands, the G7 appears ready to “reject the demand”, RFE added. German energy minister Robert Habeck last week said that “all G7 ministers agreed completely that this [would be] a one-sided and clear breach of the existing contracts”.
“Payment in ruble is not acceptable and we will urge the companies affected not to follow Putin's demand,” he added after a meeting between officials from France, Germany, Italy, Japan, the US, the UK and Canada.
The move is an effort by Putin to “troll the West over its energy addiction”, Politico said. But it is “a high-stakes gamble” when Russia’s economy is already in freefall.
“Either the West caves and complies with Putin’s demands,” the site said, “or it balks and risks seeing how far Putin will go in withholding gas supplies and potentially cutting off the cash needed by his flailing domestic economy.”
Create an account with the same email registered to your subscription to unlock access.
-
Who actually needs life insurance?
The Explainer If you have kids or are worried about passing on debt, the added security may be worth it
By Becca Stanek, The Week US Published
-
Sexual wellness trends to know, from products and therapies to retreats and hotels
The Week Recommends Talking about pleasure and sexual health is becoming less taboo
By Theara Coleman, The Week US Published
-
Is the AI bubble deflating?
Today's Big Question Growing skepticism and high costs prompt reconsideration
By Joel Mathis, The Week US Published
-
Has life in Russia regressed since the Ukraine invasion?
Today's big question The 'war economy' has defied Western sanctions as ordinary citizens rally round the regime
By Elliott Goat, The Week UK Published
-
Geopolitics and the economy in 2024
Talking Point The West is banking on a year of falling inflation. Don't rule out a shock
By The Week UK Published
-
US-led price cap on Russian oil 'almost completely circumvented'
Speed Read 'Almost none' of seaborne crude oil from Moscow stayed below $60 per barrel limit imposed by G7 and EU last year
By Harriet Marsden, The Week UK Published
-
Mexico's Sinaloa cartel bans fentanyl, reportedly under pain of death
Speed Read The top exporter of fentanyl to the U.S. is apparently looking to diversify as law enforcement turns up the heat
By Peter Weber, The Week US Published
-
The threat posed by bonds to the global financial system
Under The Radar The worst bear market in a century is unleashing huge strain on parts of the financial system
By The Week Staff Published
-
China: a superpower’s slump
The Explainer After 40 years of explosive growth, China’s economy is now in deep distress — with no turnaround in sight
By The Week Staff Published
-
The collapse of the Russian rouble
feature The Russian currency has hit its lowest point since the immediate aftermath of the invasion of Ukraine
By Arion McNicoll Published
-
Has Saudi Arabia lost control of oil prices?
Today's Big Question Kingdom goes it alone to cut production, risking tension with US and reigniting cooling inflation in Europe
By The Week Staff Published