Russia's Gas Payment Shake-Up: A New Economic Strain

Russian President Vladimir Putin's decree complicates foreign payments for Russian gas by requiring currency conversion outside of Gazprombank due to U.S. sanctions. This disrupts the previous rouble payment system, causing challenges for gas buyers including Hungary, while impacting Russian-European gas transactions.

In a move that adds complexity to international energy transactions, Russian President Vladimir Putin has annulled the option for foreign buyers to convert their currency into roubles at Gazprombank, according to a decree issued on Thursday. This shift complicates the payment process amid ongoing U.S. sanctions on Gazprombank.

The sanctions, which came into effect last month, prevent Gazprombank from engaging in any new energy-related transactions with the U.S. financial system. These restrictions accordingly prohibit American businesses from transacting with the bank and freeze its U.S. assets.

Previously, Putin had mandated in March 2022 that foreign buyers pay for Russian gas in roubles via Gazprombank. However, the updated decree now halts all such conversions, stipulating that payments can only resume when sanctions are lifted, subject to the Russian president's decision.

(With inputs from agencies.)