Russian President Vladimir Putin said on Wednesday that gas sales to countries deemed unfriendly to Moscow would have to be paid in rubles, noting a freeze on Russia's assets by foreign nations had destroyed Moscow's trust.

As of January 27, some 58% of Russian gas giant Gazprom's sales of natural gas to Europe and other countries were  settled in euros. In the third quarter of last year, 39% were in US dollars.

"Russia will continue, of course, to supply natural gas in accordance with volumes and prices ... fixed in previously concluded contracts," Putin said on Wednesday at a televised meeting with top government ministers.

"The changes will only affect the currency of payment, which will be changed to Russian rubles," he said.

The announcement comes as the West has imposed sweeping sanctions on Russia, hoping to pressure it into withdrawing its invading forces from Ukraine.

Immediately after the announcement, the ruble strengthened against the US dollar and the euro.

Soon after Putin's announcement, Russian space agency Roscosmos announced it would conduct all future international contracts in rubles.

Earlier in March, the Russian government announced a list of 48 states deemed to be unfriendly. They included all EU member countries, the US, Japan, Switzerland and Norway. 

What will happen now?

The announced move could help the struggling Russian currency, as many European countries, including Germany, are still dependent on Moscow for much of their energy supplies.

The ruble has fallen massively in value following news of the Russian invasion and amid the accompanying Western sanctions, but rose to its highest level against the dollar and euro since March 2 directly following Putin's announcement.

Putin said the government and central bank had one week to work out how to move gas-selling operation to the Russian currency and that state-controlled energy giant Gazprom would be ordered to change gas contracts accordingly.

In 2021, Russia exported around $55.5 billion (€50.06 billion) worth of natural gas to other countries worldwide. 

Germany says switching to rubles would be a 'breach of contract'

Germany pledged to consult its allies on the future gas payments.

"The announcement of paying in rubles is... a breach of the contract and we will now discuss with our European partners how we would react to that," said German Economy Minister Robert Habeck. Before Moscow invaded Ukraine, Germany imported 55% of its natural gas from Russia.

Austrian energy company OMV said it has no plans to pay in rubles. Chief Executive Alfred Stern said in comments to TV broadcaster Pul 24: "I'm not allowed to do something like that." He noted that existing contracts call for payments in euros. About 80% of the gas used in Austria comes from Russia.

tj/dj (AFP, Reuters)