Putin cancels option for rubles conversion at Gazprombank in Russian gas payments

Russian President Vladimir Putin cancelled the option for buyers of Russian gas to convert currency into rubles at Gazprombank, a presidential decree showed on Thursday, complicating the payments process as buyers must now convert their currency elsewhere.

US sanctions on Gazprombank imposed last month mean Gazprombank cannot handle any new energy-related transactions that touch the US financial system. The sanctions ban Americans from doing business with the bank and freeze its US assets.

Gazprombank, one of Russia’s largest banks, is partially owned by Kremlin-owned gas company Gazprom.

The lender said separately in a statement it remained the only bank authorised to process payments for Russian gas by foreign buyers, but it will receive payments only in rubles.

“Gazprombank no longer assists foreign buyers in converting foreign currency into rubles for the purpose of payments for natural gas,” it said.

Putin issued an initial decree in March 2022 forcing buyers of Russian gas to pay for deliveries via Gazprombank through a scheme involving payments in rubles.

The mechanics of payments and currency conversion after the amendments to the decree were published on Thursday were not fully clear. Russian authorities have said they have been working on ways to resolve the issue.

The updated decree says payments for Russian gas via the K-type ruble and foreign currency accounts will not be conducted until the sanctions against Gazprombank are lifted and could be resumed by a decision of the Russian president.

Russia shipped about 15 billion cubic metres (bcm) of gas via Ukraine in 2023 – only 8 percent of the peak Russian gas flows to Europe through various routes in 2018-2019.

However, some countries such as Turkey and Hungary still buy gas in large volumes from Russia.

Hungary has asked the United States to exempt Gazprombank from sanctions when it comes to payments for natural gas, saying those sanctions could negatively affect some US allies.

According to the sanctions, the companies should unwind their transactions with the bank by Dec. 20.