The threat was issued as Admiral Sir Tony Radakin said Mr Putin had been “misled” about the effectiveness of his country’s armed forces, with “early indications” suggesting Moscow was withdrawing troops from Kyiv – a move that has opened them up to counter attacks by Ukrainian defenders.
Western companies and governments joined Britain in rejecting Russia’s gas payment demands as a breach of existing contracts, which are set in euros or US dollars.
A Kremlin decree setting out that contracts would be stopped if buyers did not sign up to the new conditions, including opening ruble accounts in Russian banks, was issued as Scottish consumers brace for a sharp hike in energy prices from today.
The energy price cap today increases by £693 after regulator Ofgem hiked the price cap on bills to £1,791, with a further increase expected in the autumn.
Under the decree on gas issued by Russia, buyers could still pay in foreign currency and authorise the bank to sell that for rubles, which are placed in the second account, where the gas is formally purchased.
In a television address, Mr Putin said: “To buy Russian gas, they need to open ruble accounts in Russian banks.
“It is from those accounts that gas will be paid for starting April 1.
“If such payments aren’t made, we will consider this a failure by the client to comply with its obligations.”
Putin last week that Russia would only accept roubles as payment from “unfriendly” countries in retaliation for sanctions.
Downing Street said Putin’s drive to have “unfriendly countries” pay for gas in rubles showed “the impact that our sanctions are having on the Russian economy”.
“We are obviously monitoring the implications of the Russian demand for the European market,” a No. 10 spokesman said.
Asked if there were any circumstances in which the UK would pay for gas in rubles, the spokesman said “that’s not something that we will be looking to do”.
They added: “There are no gas pipes directly linking the UK with Russia. Our imports from Russia made up less than 4 per cent of total UK gas supply in 2021, so we are obviously less reliant on it than many of our European partners.”
Western companies and governments joined Britain in rejected the demands as a breach of existing contracts, which are set in euros or US dollars.
Germany responded by warning it will not be blackmailed by Mr Putin.
At a news conference, German economy minister Robert Habeck said he had not yet seen the new decree signed by Mr Putin, but his country would stick to existing contracts.
He said: "With regard to the threat, demand or consideration – one doesn't know what to call it anymore – to be made to pay in roubles, it is crucial for us that the contracts are respected.”
Separately, German Chancellor Olaf Scholz insisted German companies would continue to pay for Russian gas using euros as stipulated in contracts.
The country had already prepared for such an action, with Germany and Austria now triggering emergency plans.
Germany, which gets about half its gas and a third of its oil from Russia, is now urging the public and companies to reduce consumption in anticipation of possible shortages.
France's economy minister Bruno Le Maire declined to comment on technical details linked to the latest Russian demands.
Analysts claim Mr Putin’s plans aim to support the national currency, which has been hit hard by sanctions.
It comes as UK defence secretary Ben Wallace announced international allies had agreed to supply more military equipment to Ukraine, including armoured vehicles and artillery ammunition.
Mr Wallace said he had taken part in a conference call with defence ministers from more than 35 nations, including the United States, New Zealand, South Korea and Japan, to discuss what assistance they could provide.
He said: “There will be more lethal aid going into Ukraine as a result of today.
“Ukraine needs longer range artillery and that’s because of what the Russian army has been doing, which is now digging in and starting to pound these cities with artillery.
“The best counter to that is other long-range artillery, so they’ll be looking for and getting more long-range artillery, ammunition predominantly.
“They are obviously looking for equipment to defend its coastline because of Russian activity down there and we’ll be looking to see what more we can do."
Mr Wallace also claimed Russia was now a “lesser country” as a result of the invasion of Ukraine.
He explained: “President Putin is not the force he used to be. He is now a man in a cage he built himself.
“His army is exhausted, he has suffered significant losses. The reputation of this great army of Russia has been trashed.
“He has not only got to live with the consequences of what he is doing to Ukraine, but he has also got to live with the consequences of what he has done to his own army.”
The comments came after Government Communications Headquarters chief Sir Jeremy Fleming said “Putin’s advisers are afraid to tell him the truth” about the conflict.
Western officials now believe Mr Putin’s inner circle functions as an “echo chamber” and he “didn’t understand … what he was doing” in Ukraine.
“The echo chamber around him might very well reinforce his opinions, rather than challenge or debate,” a source said.
Earlier the head of the British armed forces claimed Mr Putin’s standing was “diminished” following his invasion into Ukraine.
Sir Tony, the Chief of the Defence Staff, told an event hosted by the Institute for Government (IfG) think-tank: “The scenes coming out of Mariupol and elsewhere are horrific, and the coming weeks will continue to be very difficult.
“But in many ways, Putin has already lost. Far from being the far-sighted manipulator of events that he would have us believe, Putin has damaged himself through a series of catastrophic misjudgements.
“What is very clear is that Putin is a weaker and more diminished figure today than he was a month ago, and conversely Nato is stronger and more united today than at any time I can remember.”
Thursday also saw the UK foreign secretary urge China not to support Russia’s actions in Ukraine.
Speaking in Delhi, Liz Truss said it was important that Beijing continued to respect Ukraine’s sovereignty.
She said: “That is an important principle that as a member of the P5 and a responsible nation that China needs to stick to and therefore we shouldn’t see China supporting Russia’s actions in Ukraine.
“I do think the strong response by Nato, the strong response by the G7 and our friends and allies around the world will make other aggressors think twice about carrying out invasions on sovereign nations.”
Elsewhere, Ukraine's government began sending dozens of buses to Mariupol in a fresh effort to evacuate people and deliver humanitarian aid.
Russia has declared a one-day ceasefire in the heavily-bombed port city, but has previously breached promises to stop attacking.