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Europe has no robust alternative to paying for Russian gas in rubles — expert

Leonardo Paz Neves of the Fundacao Getulio Vargas foundation believes, the new payment rules for Russian gas will cause no turmoil on the global energy market

RIO DE JANEIRO, April 2. /TASS/. European countries, who are obliged to pay for Russian gas in rubles starting from April 1, have no robust alternative to substitute Russian deliveries, Brazilian political analyst Leonardo Paz Neves of the Fundacao Getulio Vargas foundation has told TASS.

"There are those who think that countries with hostile attitude to Russia would start purchasing gas and oil from third countries. However, this assumption ignores the fact that it won’t be easy to replace the fuel imports in those huge volumes," he said. "Stop buying from Russia and find an alternative supplier instead… well, it does not work that way."

"Of course, they [Europeans] may increase the purchases of shale gas and oil from the United States, if they increase production, but the price [for Europe] will be way higher," Neves continued, adding that growing energy prices would eventually undermine the competitiveness of European companies.

At the same time, the expert believes, the new payment rules for Russian gas will cause no turmoil on the global energy market and will help Russia to stabilize its national currency.

In his opinion, the ruble "is close to" rebounding to levels observed prior to the start of the Russian special military operation in Ukraine.

Those who refuse to buy Russian gas for rubles, have only two options, but both of them will not be available in the short-term perspective, the expert continued.

"Depending on the structure of their energy sector, they can reduce the demand for gas by using alternative sources of energy, but this would be a midterm or even a long-term solution. Initiating an arbitration process to challenge Russia’s decision to amend the contract is the other possible variant, but it would also take time," he said.

The expert believes that, under the most likely scenarios, western nations will either have to agree to new terms or lift their anti-Russian sanctions in exchange for previous gas payment terms.

Last week Russian President Vladimir Putin requested moving payments for gas supplies to unfriendly countries to rubles, saying that Moscow would refuse accepting payments on such contracts in discredited currencies, including dollars and euros. He also tasked the government with giving Gazprom an instruction on amending present contracts. On March 31, Putin signed a decree on rules of gas trade with unfriendly countries, which stipulates a new system of contract payment.

The new procedure of payment for Russian pipeline gas in rubles by buyers from unfriendly countries came into force on April 1. Those buyers are required to open special ruble and foreign currency accounts with Gazprombank to pay for gas supplies. Currency conversion will be carried out on Russian exchanges. In case of incomplete payment, the Russian customs is authorized to ban deliveries. The government commission for the control of foreign investment in Russia has the right to issue exceptions to these rules for individual buyers.