Gazprom PJSC said it will shift its contract to supply gas to China to rubles and yuan from euros, as the Kremlin steps up efforts to move trade out of currencies it considers “unfriendly” amid US and European sanctions.
The state-run gas giant signed an additional agreement to its existing contract with China National Petroleum Corp. on the issue Tuesday, Gazprom said in a statement. Payment will be made 50% in rubles and 50% in yuan, effective immediately, according to a person familiar with the plans who spoke on condition of anonymity to discuss matters that aren’t yet public.
President Vladimir Putin demanded Gazprom’s main customers in Europe pay for their gas in rubles earlier this year after the US and its allies froze more than $300 billion in Russia’s central bank reserves held in dollars and euros over his invasion of Ukraine. Several buyers refused and Gazprom cut off their supplies, while the biggest consumers agreed to Moscow’s new terms.
Russia is also shifting to ruble payments for gas with Turkey, which hasn’t joined sanctions and enjoys close ties with the Kremlin. But initially only a quarter of the total will be paid in the Russian currency, with the remainder in dollars and euros, the person said. The share in rubles will grow over time, the person added.
Gazprom’s contract to supply China via the Power of Siberia pipeline, signed in 2019, was estimated to be worth $400 billion over its 30-year life. Shipments have been increasing steadily and are due to reach at least 15 billion cubic meters in 2022, compared with 10.4 billion cubic meters delivered last year.
In February, as Putin visited Beijing in the buildup to the war, Gazprom signed a second deal to deliver a further 10 billion cubic meters a year over 25 years via a new pipeline, though supplies haven’t yet begun. A few weeks later, the gas producer also signed a contract to design the Soyuz Vostok link across Mongolia toward China, which could carry as much as 50 billion cubic meters a year.