Russia Hits Western Energy Markets Demanding Gas Payment in Ruble

Russia Hits Western Energy Markets Demanding Gas Payment in Ruble

Photo: https://csn-tv.ru/

Vladimir Putin announced the transition to payments in rubles for Russian gas supplied under previously signed contracts on the eve of a meeting with members of the government. The Russian President specified that payments in all currencies of those countries, which have compromised themselves in relation to Russia, will not be accepted.

The Russian authorities were prompted to take this step by the policies of those countries that impose more and more sanctions against Russia. One of such Western restrictions is the freezing of almost half of the gold and foreign currency reserves of the Central Bank of Russia, which amounts to about $300 billion.

At present, Putin said that it makes “no sense” for Russia to export its goods to Europe and the United States for euros, dollars and other currencies. Natural gas will continue to be supplied in strict accordance with the concluded contracts and the previously agreed volumes, he said. In the near future, the necessary measures will be taken to ensure that the so-called “unfriendly countries” pay for gas in rubles. According to AiF, Putin explained that in this case, the changes would concern “only the currency of payment.” He instructed members of the government to give a proper directive to Gazprom to make appropriate changes to the existing contracts.

In addition, as media reports, Putin underlined at the meeting that all the necessary measures to switch to the payment in rubles should be implemented fairly quickly. The President instructed the Central Bank of Russia and the Government to work out the procedure for purchasing our national currency on the domestic market for those countries that buy Russian gas within a week.

It is understandable that such a drastic decision was received rather ambiguously by countries that are linked to Russia by various contracts for the supply of a variety of products and goods. First of all, of course, it is subject to Russian gas, which has quite a large share of the world market. According to Gazeta.ru, Japanese Finance Minister Shunichi Suzuki has already said that he “does not yet understand” how it will be possible to pay in rubles for supplies of Russian gas.

At a meeting of the Japanese parliament, Suzuki also clarified that the country's authorities will carefully study the situation created, as well as monitor the “spillover effect” of the sanctions imposed by Japan on Russia. In addition, according to media reports, Suzuki said that Japan will coordinate its actions with G7 countries in connection with the introduction of ruble payments for gas supplies.

As reported by RIA Novosti, Serbian President Aleksandar Vucic said that paying for gas supplies from Russia in rubles would create a lot of problems. Giving a speech in Milan, Francesco Giavazzi, economic adviser to the Italian prime minister, said that “we should still pay for Russian gas in euros.” So far, the Italian government has not taken any decision on paying for Russian gas in rubles. According to Javazzi, paying in rubles in this case can be regarded as a way to “circumvent the sanctions.” These words of the economic advisor to the prime minister of Italy were quoted by the Ansa news agency.

Understandably, the Russian president's response to the sanctions caused discontent in European countries. According to Sergei Suverov, an investment strategist for Ari Capital, this decision can actually be equated to the 100% sale of foreign currency proceeds from gas sales to Europe. After all, Europeans will now have to come to the foreign exchange market and sell their currency for the rubles they will need to pay for gas contracts.

It should be reminded to the governments of the so-called “unfriendly countries,” which do not understand how they can buy goods from Russia for rubles that back in 2019, the German hub NCG purchased almost 80 million cubic meters of gas for rubles. Gazprom Export conducted this transaction, as the company's press service announced on March 7, on the electronic trading platform they have. So, as Izvestia reported at the time, payments in rubles of this kind did take place.

The fact is that in the fall of 2019, both Russia and European countries began to pursue the course of de-dollarization of their economies. That is why at that time, for the first time in 5 years, the Russian Finance Ministry placed its government bonds not in dollars, but in euros. At that time, the European Commission developed a program to strengthen the euro, and it was done, again, according to the Europeans, only because by trading in US dollars, they were exposing their businesses to risks.

It turns out that Russia does not take any extraordinary measures, offering its trading partners to pay for their own gas in Russian currency. European countries made similar steps several years ago with regard to the dollar not to expose themselves to risks. Now Russia, on which new sanctions are imposed almost every day, simply does not want to and cannot put itself at risk. So it turns out, as the saying goes, they got a taste of their own medicine.

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