Russian President Vladimir Putin has canceled the option for international buyers of Russian gas to convert payments into roubles through Gazprombank, as stated in a presidential decree issued on Thursday. This change adds complexity to the payment process, forcing foreign buyers to arrange currency conversions independently, as reported by several news agencies.

The move follows U.S. sanctions imposed last month on Gazprombank, which block the institution from handling new energy-related transactions involving the U.S. financial system. These sanctions also freeze Gazprombank's U.S. assets and prohibit Americans from doing business with the bank. Gazprombank, partially owned by Kremlin-controlled energy giant Gazprom, has been a crucial conduit for processing payments for Russian gas exports.

In response to the sanctions, Gazprombank announced that while it remains the sole authorized bank for processing payments for Russian gas by foreign buyers, it will only accept payments directly in roubles. The bank stated, "Gazprombank no longer assists foreign buyers in converting foreign currency into roubles for natural gas payments."

This policy shift modifies an earlier decree issued by Putin in March 2022, which required foreign gas buyers to use Gazprombank for payments involving a currency conversion mechanism to roubles. The new amendments do not provide clear details on how buyers should manage currency conversions under the updated rules, leaving a degree of uncertainty. Russian authorities have indicated they are working on measures to address the challenges posed by the change.

The decree also stipulates that payments through Gazprombank’s designated rouble and foreign currency accounts will remain suspended as long as U.S. sanctions are in place. Resumption of such transactions will require a direct decision by President Putin.

Russia’s gas exports to Europe have already seen a sharp decline, with only 15 billion cubic meters (bcm) transported via Ukraine in 2023, representing a mere 8% of the peak volumes delivered through various routes in 2018-2019. Despite this overall decrease, some nations, including Turkey and Hungary, continue to rely heavily on Russian gas.

Hungary has appealed to the United States to exempt Gazprombank from sanctions related to natural gas payments, warning that the restrictions could negatively affect certain U.S. allies. The sanctions currently require companies to wind down their transactions with Gazprombank by December 20.

The cancellation of Gazprombank’s role in currency conversions further complicates the energy trade landscape, underscoring the challenges posed by international sanctions and shifting trade mechanisms in the Russian gas sector.