Putin demands gas payments be made in rubles by April 1

Russian President Vladimir Putin announced on Thursday that he had signed a decree saying all Russian gas exports must be paid for in rubles from April 1 and warned that contracts would be severed if his terms were not met.

"In order to purchase Russian natural gas, they must open ruble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow," Putin told reporters.

"If such payments are not made, we will consider this a default on the part of buyers, with all the ensuing consequences. Nobody sells us anything for free, and we are not going to do charity either - that is, existing contracts will be stopped."

Europe presently obtains about a third of its gas from Russia and the move has left many European governments concerned about future energy shortages.

Putin’s announcement has so far boosted the Russian currency, which has suffered a historic beating since Russian troops first invaded Ukraine on Feb. 24, Bloomberg reported.

Western governments (and businesses) have quickly moved to reject Putin’s terms, however, and have stated that a change in currency would equate to a breach of existing contracts, which are set in euros and dollars. On Thursday, France’s economic minister said both Paris and Berlin were preparing for a possible scenario in which Russian gas flows could be halted – an event that would throw Europe into a full-scale energy crisis.

According to a new Reuters report, Putin’s order establishes a mechanism for buyers to transfer foreign currency to a special account at a Russian bank, which would later send rubles back to the foreign buyer to make payment for the gas. The move, Putin claims, is meant to strengthen Russia’s national sovereignty while allowing Moscow to meet its contractual obligations.