Russia remains determined to force European buyers of pipeline gas to agree to amend their current contracts with Gazprom and switch to paying in rubles.

President Vladimir Putin’s spokesman Dmitry Peskov said Gazprom will not continue to “deliver its gas for free” to Europe if it does not start receiving payments in the Russian currency.

“In our situation, it is hardly possible and expedient [for Russia] to engage in pan-European charity,” Peskov said.

He was apparently referring to proposals from some European countries that payments for deliveries of Russian hydrocarbons may be deposited in special escrow accounts, where they will be held while the war in Ukraine continues.

Earlier this week, acting on a previous Putin ruling, the Russian government instructed Gazprom to stop accepting payments in euros and US dollars from customers in “unfriendly countries” by 31 March.

In the Kremlin’s view, this label includes countries that have introduced wide-ranging sanctions against Russian officials, banks, corporations and individuals in response to what Moscow continues to describe as a “special military operation” in Ukraine. It could also include those who have simply condemned the invasion.

Additionally, the government has asked the Central Bank to establish a mechanism by 31 March to permit foreign buyers of Russian gas to deposit funds in euros and US dollars in Russian banks.

European gas buyers will then be given the possibility of buying rubles at the Moscow Exchange, known as Moex, to accumulate the necessary reserves of Russian currency in order to pay Gazprom, according to the government.

Reacting to the ruling, one of Gazprom’s European customers, Italy’s Eni, said it will not comply with the demand to pay in rubles.

“Eni does not have rubles. The contracts say that fuel payments should be made in euros and the contracts need to be amended to change the terms,” chief executive Claudio Descalzi told an industry forum in Dubai this week.

Last week, Chancellor Olaf Scholz said most of Gazprom’s contracts with customers in Germany are in euros or dollars, and “that's what counts”.

The Group of Seven major economies agreed on Monday to reject the demand for gas payments to be made in rubles.

The German Minister for Economic Affairs & Climate Action, Robert Habeck, told reporters that “all G-7 ministers agreed completely that this [would be] a one-sided and clear breach of the existing contracts”.

“Payment in rubles is not acceptable, and we will urge the companies affected not to follow Putin’s demand,” Habeck added.

In anticipation of a large influx of foreign currency to Moex, the ruble broke back through the barrier of 100 to one US dollar this week, trading at about 88 rubles per dollar earlier on Tuesday, according to Moscow business daily RBK.

State television network Rossiya24 said today that authorities expect about $6 billion worth of foreign currency proceeds per month from European gas buyers, helping to prop up the Russian currency.

The ruble lost more than half of its value against major foreign currencies this month in the wake of strong international sanctions, causing a jump in the prices of staples and consumer goods inside the country.

With Russia imposing tough restrictions on its citizens’ access to foreign currencies, black market rates for the US dollar have fluctuated from 135 rubles to 180 rubles, based on data from RBK and postings in social network channels established to connect individual sellers and buyers.

Gazprom has not commented on its plans regarding supplies to Europe in April, as payments for deliveries reportedly do not become due until the second half of the month.

Mikhail Krutikhin, a partner with Moscow energy consultancy RusEnergy, said it is impossible to forecast how what he described as “senseless decisions” will be implemented.

Peskov insisted on Tuesday that “Russian gas remains a best option” for Europeans in terms of its affordability and availability.

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