State-controlled Russian energy giant Gazprom said it was cutting off Poland and Bulgaria because they refused to pay in Russian rubles, as President Vladimir Putin has demanded.
The Kremlin warned of that possibility if countries don't pay for energy supplies in rubles. But Russia also relies on oil and gas sales to fund its government as sanctions have squeezed its financial system. The economic motives for demanding rubles aren't clear because Gazprom already has to sell 80% of its foreign earnings for rubles, so the boost to Russia's currency could be minimal. One motive could be political, to show the public at home that Putin can dictate the terms of gas exports. And by requiring payments through Gazprombank, the move could discourage further sanctions against that bank.
Many aren't happy that European utilities are still buying energy from Russia, which on average got 43% of its annual government revenue from oil and gas sales between 2011 and 2020, according to the U.S. Energy Information Administration. Germany, the continent's largest economy, is heavily dependent on Russian energy. Its central bank said a total cutoff could mean 5 percentage points of lost economic output and higher inflation.