Ruble soars to two year high against euro as Russian gas shipments to Poland and Bulgaria halt

The Russian ruble rose to two-year high against the Euro on Wednesday after the Kremlin announced that it had stopped gas shipments to Poland and Bulgaria, a move which has left European leaders scrambling to achieve energy independence from Moscow.

Russia’s state-owned energy giant Gazprom announced on Wednesday that it had halted gas deliveries to Poland and Bulgaria after the two European Union members refused to make payments in Euros.

Following the announcement, Bulgarian Prime Minister Kiril Petkov said the move amounted to a breach of contract and said “we will not succumb to such blackmail.”

Last month, Russian President Vladimir Putin signed a decree stipulating that foreign buyers pay for gas in rubles from April 1 – warning that contracts would be halted if such payments were not made.

“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 said in televised remarks.

“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.”

According to a report from Reuters, the ruble gained 1.1% to trade at 76.00 against the euro by 8:31 GMT. It was also 1% stronger against the dollar trading at 72.82.

Although the news was surely welcomed by Moscow, analysts from Russia’s Promsvyazbank have noted that corporate income taxes due on Thursday could prevent the dollar from “significant strengthening against the ruble.”

Furthermore, movements in rubles are currently limited by capital controls imposed by Russia’s central bank and the economy is facing soaring inflation, capital flight and the risk of a possible debt default sparked by unprecedented Western sanctions.

For now, however, Russian stock indexes are on the rise.

On Wednesday afternoon, the RTS index was up 2.7% to 1,027.0 points while the MOEX Russian index was 2.3% higher at 2,371.3 points.