ER Editor: We’re publishing below two pieces by ‘Samizdat,’ which are RT articles published through Alethonews, as well as a piece by 21st Century Wire.
As Moon of Alabama observes about this move to make certain hostile countries pay for Russian oil and gas in rubles:
To pay in ruble one first has to buy rubles. With higher demand for rubles and no change in supplies, the price for the Russian currency will go up. As Russia is selling hydrocarbons and other resources for billions of dollars per day, the ruble is likely to soon reach record heights.
On February 28 another round of sanctions hit Russia. The part of the Russian central bank reserves that were stored in the ‘west’ were frozen. The central bank immediately pushed its interest rate from 9% to 20% to prevent a flight from the ruble. This helped to lessen the damage but made credit expensive and has hit the future growth potential in Russia.
But with a high new ruble demand from outside of Russia, the central bank will soon be able to lower its interest rate to more normal levels. Credit conditions will ease and investment in Russia, to replace products that had so far been imported, will rise again.
Today’s move to demand rubles for hydrocarbons is only one of the many steps Russia can, and likely will take, to retaliate for sanctions from the ‘west’.
Putin wants rubles for Russian gas
Samizdat RT | March 23, 2022
Russia will now accept payment for gas exports to “unfriendly countries” in rubles only, President Vladimir Putin said at a meeting with the government on Wednesday.
The president explained that Russia plans to abandon all “compromised” currencies in payment settlements. He added that illegitimate decisions by a number of Western countries to freeze Russia’s assets destroyed all confidence in their currencies.
“I have decided to implement in the shortest possible time a set of measures to change the payments for – yes, let’s start with this – for our natural gas supplied to the so-called unfriendly countries in Russian rubles, that is to stop using all compromised currencies for transactions,” the Russian president said.
“It doesn’t make sense to deliver our goods to the EU and the US and get paid in dollars and euros,” he added.
Putin gave the Central Bank and the government a week to determine the procedure for operations for buying rubles on the domestic market for importers of Russian gas.
The president added that Russia will continue to supply gas in accordance with the volumes and pricing principles of the contracts. Only the currency of payment will change.
The announcement caused a spike in the cost of contracts for gas supply at the TTF European hub, Forbes Russia quoted data from the Intercontinental Exchange as indicating. During Wednesday’s trading, the gas price rose from €97 per megawatt hour (MWh) to approximately €108.5 per 1MWh, but after the president’s speech, it jumped by another €10 to €118.75 per 1MWh, before retreating to €114 per 1MWh as of 1pm GMT.
In the past month, Russia has been hit with several rounds of unprecedented international sanctions over its military operation in Ukraine. The US, EU, and their allies have cut off the country from their financial systems, limited dollar and euro transactions, and froze roughly $300 billion in Russian forex reserves abroad, among other measures. At the same time, they have continued to buy Russian oil and gas.
Russia’s ruble payment plan leaves European gas buyers confused
Samizdat | March 23, 2022
German gas industry group Zukunft Gas said on Wednesday it was confused by the statement of Russian President Vladimir Putin about the switch of payments for Russian natural gas supplies to rubles.
“We took the message that Russia wants [us] to pay for gas supplies only in rubles with great confusion,” Timm Kehler, the director general of Zukunft Gas, told DPA agency. “We can’t predict at this moment what specific implications this will have for the gas trade,” Kehler said.
Meanwhile, Austrian OMV said it was going to continue to pay for Russian gas in euros. According to the head of the company, they have no other contractual basis.
President Putin announced earlier in the day that Russia will now accept payment for gas exports to “unfriendly countries” in rubles only.
The measure is the first serious response from Moscow to sanctions imposed on Russia by the US and its allies over the conflict in Ukraine. A number of mostly Western countries have taken steps to isolate Russia from their financial systems. Major Russian banks have been cut off from the SWIFT payment network, making it difficult for the country to continue transactions in euros and US dollars.
Ruble Surges After Putin Ditches Dollars and Euros for Russian Oil and Gas
Earlier this week, 21WIRE highlighted the canny move by Russia to begin trading oil with India under a brand new rupee-ruble mechanism – as a means of bypassing the global sanctions wall erected by the West in its economic war on Russia, and potentially anyone else who dares to defy the global diktats of the Washington-London-Brussels Axis.
Today, the Russian President Vladimir Putin may have just pulled one of the most adroit strategic moves in living memory – one which has the potential rock the US dollar’s long-held privileged position as an unassailable world reserve currency.
Putin announced that from now on, Russia will only accept payments in their own currency, rubles, for any future oil and gas deliveries to “unfriendly countries.” Presumably, this would include all EU members, the US, and anyone else who is dutifully going along with Washington’s orders on sanctioning Russia.
“I have decided to implement a set of measures to transfer payment for our gas supplies to unfriendly countries into Russian rubles,” said Putin this afternoon during a televised government address.
According to the President, Russia will stop taking payments in currencies that have been “compromised,” namely US dollars and euros.
Immediately after the announcement, the Russian ruble, after opening at 95, shot up in value against the dollar before hitting a three-week high peaking at 110, before settling down to 103 just before close. Experts believe this may be the beginning of a steady climb in value for the Russian currency as it may now officially achieve the status of a reserve currency – held perpetually in foreign banks in order to settle rolling purchases of major commodities, especially oil and gas. Meanwhile, the US dollar will steadily decline in comparative value as a result of shrinking demand.
It appears the brash US plan to strangle the Russian economy in hopes that the Russian people might suffer enough to rise up and overthrow Putin – may have just backfired in the most extraordinary way. In fact, just the opposite is happening: the Russian announcement sent some European and UK wholesale gas prices up around 15-20% – further hurting the working and middle classes and the SME business sector.
Speaking to the New York Times, chief eurozone economist Claus Vistesen from Pantheon Macroeconomics, said the action meant that every time a Western country bought a barrel of oil or a cubic meter of gas, it would be “propping up his domestic currency.”
“If you’re invoiced in rubles, you’ve got to go out and buy rubles,” he said. “I don’t know if there is a workaround,” said Vistesen.
In a single day of trading, the Russian currency has regained a significant chunk of its losses incurred in the immediate aftermath of the global sanctions war declared by Western countries just over 3 weeks ago.
Moscow’s announcement comes after the news this week that western banks froze over $300 billion in Russian foreign currency reserves, as part of the Washington’s pledge to ‘crush the Russian economy’ as punishment for launching a military intervention in Ukraine on February 25th. Putin described this unprecedented move led by the US as theft, and further evidence that the dollar and euro “compromised themselves” and are now considered unreliable – not just for Russia, but for a significant portion of the rest of the world, too.
While some initial damage has been done to the Russian economy, it remains to be seen if the West’s strategy will end up being as effective as politicians promised it would be. Recently, the Russian central bank took a number of emergency measures to support the ruble, including doubling interest rates to 20%.
All in all, Russian gas accounts for roughly 40% of Europe’s total consumption, with paying ranging between 200 million to 800 million euros ($880 million) per day so far in 2022.
Putin also reassured trading partners that, “Russia will continue supplying gas in the volumes fixed in earlier contracts.”
He also said that by freezing of Russia’s assets abroad, the United States and the European Union have declared a “real default” on their obligations to Russia.
“Now everyone in the world knows that obligations in dollars can be defaulted,” said the Russian President.
His message to anyone dealing in dollars and Euros: you too could be ‘canceled’ at a moment’s notice, should you fall foul of the Western bloc.
Featured image: A Russian ruble coin is pictured in front of St. Basil cathedral in central Moscow, on November 20, 2014. Alexander Nemenov /AFP/Getty Images
Published to The Liberty Beacon from EuropeReloaded.com
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