Putin signs order demanding gas payments in roubles from Friday

The threat of a gas shutoff was reduced, however, as details emerged about the new deal, which appeared to allow European buyers to continue to pay for gas in euros and dollars.

The decree Putin signed on Thursday authorises the state-controlled Gazprombank to open foreign currency and rouble accounts for gas purchases. European buyers would pay in foreign currency and then authorise Gazprombank to make the conversion into roubles, which would then be used to formally purchase the gas.

One gas analyst said the use of Gazprombank as an intermediary may allow western economies to drop their opposition. He said market prices for gas, which rose slightly on Thursday, did not indicate fears of an imminent major supply disruption.

The impasse had already led Germany and Austria to make preparations for potential gas rationing, activating an emergency plan designed to help it cope with any disruption in supplies from Russia.

Putin spoke to the German chancellor, Olaf Scholz, and the Italian prime minister, Mario Draghi, about the new deal on Thursday. Both sought to calm fears of a gas shutoff, with Scholz telling journalists that he believed Germany would continue to pay for gas in euros.

There are fears Putin could extend the rouble payment plan to include exports of oil, grain, fertilisers, coal, metals and other key commodities.

The value of the rouble collapsed after Russia invaded Ukraine, then made a partial recovery. With the currency still trading at low levels, Russian exports bring in less money to subsidise state services and fund the war than previously expected.

The country has forced large exporters to sell 80% of their foreign currency in order to prop up the rouble as Russia faces unprecedented sanctions over its invasion of Ukraine.

The gas payment plan would perform a similar function, although it is not clear why it would make any difference whether foreign buyers or Russian exporters are the ones to convert dollars and euros into roubles.