Italy: Russia won’t seek payment in rubles for natural gas

The Detroit News

Rome – Italian Premier Mario Draghi said Thursday that he had received assurances from Russia’s leader that Europe would not have to pay for natural gas in rubles as demanded, similar to pledges that Germany received, and diffused fears that Moscow would cut off supplies that are used for heating and electricity.

Draghi said Russian President Vladimir Putin assured him during a 40-minute phone call Wednesday evening that “existing contracts remain in force. … European companies will continue to pay in dollars and euros.”

Italian Premier Mario Draghi attends a press conference at the Foreign Press Club in Rome, Thursday, March 31, 2022.

More: Events in the Russian invasion of Ukraine on Thursday, March 31, 2022

Putin announced last week that Russia will demand “unfriendly” countries pay for natural gas only in Russian currency, instructing the central bank to work out a procedure for buyers to acquire rubles in Russia. That sent already high gas prices even higher amid fears it could be a prelude to a natural gas shutoff, which could disrupt Europe’s economy and hurt Russia’s finances. The Group of Seven major economies, including Italy and Germany, agreed to reject the demand.

The Italian leader indicated that Russia still had a desire for payments in rubles but that it might handle the currency conversion. Draghi said Putin gave a lengthy explanation of how to both maintain the payments in euros in dollars while satisfying Russia’s “indication of payments in rubles.’’

Draghi said he referred the discussion to experts and that analysis was underway “to understand what it means,” including whether “European companies can continue to pay as foreseen, if this means something for the ongoing sanctions.”

“The feeling is one I have had since the beginning, that it is absolutely not simple to change the currency of payments without violating the contracts,’’ Draghi said.

German Chancellor Olaf Scholz received similar assurances from Putin on Wednesday evening. Scholz had asked for further details of the process, which involves payments to a Russian bank not subjected to sanctions, his office said.

Italy’s Draghi also told the foreign press corps that Europe is pushing for a cap on gas prices with Russia, saying its payments are funding the war in Ukraine and the prices being paid by Europe are out of line with the global market.

“We – Germany and Italy, along with other countries that are importers of gas, coal, grains, corn – are financing the war. There is no doubt,’’ Draghi said. “For this reason, Italy along with other countries, are pushing for a cap on the price of gas. There is no substantial reason that the price of gas is so high for Europeans.”

Draghi noted that Russia has no other market for its gas, giving Europe room to maneuver. Asked about the risk that Russia would respond by turning off the taps, Draghi said, “no there is no danger.”

The prospect of continued gas deliveries in exchange for euros drew a cautious welcome from German industry.

“It’s good news at least in the short term, because Russian gas deliveries can’t be replaced in the short term,” Achim Dercks, the deputy managing director of the Association of German Chambers of Commerce and Industry, told RBB24 Inforadio on Thursday.

He noted that companies are concerned that any cutoff would affect industry in particular, “but ultimately that would have severe economic effects for us all.”