Russian President Vladimir Putin has issued a decree stating that foreign buyers must pay for Russian gas in roubles starting on Friday or risk having their supplies cut. This move, which European capitals have rejected and Berlin has called "blackmail", could result in Europe losing more than a third of its gas supply. Germany, which is heavily reliant on Russian gas, has activated an emergency plan that may lead to rationing in the largest economy in Europe. Putin is using energy exports as a powerful tool to retaliate against the extensive Western sanctions imposed on Russian entities in response to Russia's invasion of Ukraine, which Moscow refers to as a "special military operation". In his televised remarks, Putin stated that purchasers of Russian gas will be required to open rouble accounts in Russian banks for payments starting on April 1. Failure to make payments in this manner will be considered a default, leading to the termination of existing contracts. It is uncertain whether foreign firms will have alternative payment options, as the European Union and G7 have rejected the use of roubles. His choice to require rouble payments has strengthened the Russian currency, which had dropped significantly following the invasion on Feb. 24. The rouble has since regained a large portion of its lost value. Western companies and governments have refused to alter their gas supply contracts to accommodate a change in payment currency. The majority of European buyers utilize euros for payment. Executives have stated that renegotiating terms would be a lengthy process, taking months or possibly longer. Paying in roubles would lessen the impact of Western restrictions on Moscow's access to foreign exchange reserves. European countries are scrambling to find alternative energy sources, but with limited options in the tight global market. The United States has offered more liquefied natural gas (LNG) but it is not sufficient to replace Russia. Germany's Economy Minister Robert Habeck stated that Russia has failed to divide Europe and Western allies are committed to not being manipulated by Russia. Berlin announced it will keep paying for Russian energy imports in euros. France's economy minister Bruno Le Maire stated that France and Germany were preparing for the possibility of Russian gas flows being stopped. Le Maire did not comment on the technical details related to Russia's recent demands for payment in roubles. Putin's order allows for payments to be made through special foreign currency and rouble accounts at Gazprombank, with foreign currency being converted into roubles through currency auctions on a Moscow exchange. Putin argued that this switch would enhance Russia's sovereignty, as Western countries were using the financial system as a weapon against Russia. He stated that it no longer made sense for Russia to conduct trade in dollars and euros when assets in those currencies were being frozen. Putin questioned what was actually happening and had already occurred. We have provided European customers with our resources, specifically gas. They accepted it, paid us in euros, and then stored the money themselves. This situation leads us to believe that we essentially gave part of the gas to Europe for free," he stated. "This cannot go on. Putin emphasized that Russia still values its business reputation. "We will adhere and will continue to adhere to our obligations in all contracts, including gas contracts. We will continue to provide gas in the specified quantities - I want to stress this - and at the prices outlined in current, long-term contracts," he stated. Following Putin's announcement, several European companies with Russian contracts either remained silent or did not respond immediately, causing further anxiety in the market. European gas prices have surged in recent months due to escalating tensions with Russia, heightening the risk of a recession. The unprecedented rise in energy prices has already led to production cutbacks for companies in industries such as steel and chemicals. Poland's PGNiG, which is under a long-term contract with Gazprom, Russia's gas pipeline export monopoly, that is set to expire at the end of the year, had no immediate response to the news. The Polish Climate Ministry did not provide an immediate response. Poland's agreement with Gazprom is for 10.2 billion cubic meters of gas annually and is in dollars. Italian energy company Eni, another significant purchaser of Russian gas in Europe, also did not comment. Eni purchased approximately 22.5 billion cubic meters of Russian gas in 2020, with contracts with Gazprom set to expire in 2035. Buyers of Russian gas in Germany, including Uniper, RWE, EnBW, and VNG, did not respond promptly to requests for comment.