European governments rejected Putin's ultimatum for Friday, with the continent's biggest recipient of Russian gas, Germany, calling it "blackmail". Moscow did, however, offer a mechanism for buyers to obtain roubles via a Russian bank.
The energy showdown has huge ramifications for Europe as US officials circle the globe to keep pressure on Putin to stop a five-week invasion that has uprooted a quarter of Ukraine's population.
Europe wants to wean itself off Russian energy but that risks further inflating soaring fuel prices. Russia has a key revenue source at stake even as it reels from sanctions.
Facing stiff resistance from Ukraine's military, Putin has played one of his biggest cards in the demand on European energy buyers.
"They must open rouble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow," he said on Thursday.
"If such payments are not made (in roubles), we will consider this a default on the part of buyers, with all the ensuing consequences ... existing contracts will be stopped."
Putin sent troops on February 24 for what he calls a "special military operation" to demilitarise and "denazify" Ukraine. Western countries say Putin's real aim was to swiftly topple Ukraine's government.
But at talks this week, Moscow said it would scale back offensives near the capital Kyiv and in the north of the country as a goodwill gesture and focus on "liberating" the southeastern Donbas region.
Kyiv and its allies say Russian forces are instead trying to regroup after taking losses from a Ukrainian counter-offensive that has recaptured suburbs of the capital plus strategic towns and villages in the northeast and southwest.
In a late-night address, Ukrainian President Volodymyr Zelenskiy warned of "battles ahead" in Donbas and the besieged southern port city of Mariupol.
"We still need to go down a very difficult path to get everything we want," Zelenskiy said.
Peace negotiations are set to resume by video conference on Friday.
With the war exacerbating global fuel prices, President Joe Biden launched the largest release ever from the US oil reserve and challenged oil giants to drill more to bring down petrol prices.
"This is a moment of consequence and peril for the world," Biden said at the White House as he announced a release of 180 million barrels starting in May. But that amount fails to cover a US loss of Russian oil, which Biden banned this month.
Western governments say Putin's demand for rouble payments would be a breach of contracts in euros or dollars.
An order signed by Putin allows customers to send foreign currency to a designated account at Russia's Gazprombank, which would then return roubles for the gas buyer to make payment.
US and European officials say Putin has been misled by generals about his military's dire performance.
The US ambassador in Moscow, John Sullivan, told Reuters the United States and Russia were "in the Mariana Trench as far as diplomatic relations go", referring to the deepest place on earth.
In a show of support for Ukraine's government, EU Parliament President Roberta Metsola wrote on Twitter late on Thursday that she was on her way to Kyiv.
The war has been particularly fierce in Mariupol, a gateway to the Black Sea that links a strategic corridor between Donbas and the Russian-annexed Crimea peninsula.
The mayor's office estimates 5000 people have died.
Tens of thousands have been trapped for weeks with scant food, water and other supplies in the city that was once home to 400,000 people but has been pulverised by bombardment.
Elsewhere, there was evidence of Ukraine's successful counterattack in Trostyanets, an eastern town, including burned-out Russian tanks and abandoned ammunition on muddy roads.
Ukraine's state nuclear company said all Russian forces that occupied the Chernobyl nuclear station had left the defunct plant, possibly concerned over radiation.
