Russia continues to supply gas to “unfriendly” countries with the change in the trading currency

“Payment in rubles” reduces Russia’s inflows of hard currency

The ruble payment adds a new financial dimension to Russian-Western tensions over energy supplies.

Reuters

Russian President Vladimir Putin asked countries he described as "unfriendly" to pay in the Russian ruble to buy gas from his country.

"Bloomberg" news agency quoted Putin as saying that he had "instructed the Central Bank and the government to draw up a plan to deal with Europe in rubles within a week," stressing that Russia will continue to supply gas, but will only change the payment currency.

after Mali

This decision adds a new financial dimension to Russian-Western tensions over energy supplies after the Russian invasion of Ukraine, at a time when economists have warned of this move, which is likely aimed at strengthening the ruble, and reducing Russia's dependence on Western financial infrastructure, noting that the negative side of this step is Reducing Russia's already diminishing flows of hard currency needed to pay for its imports from abroad, noting that "payment of Russia's dues in rubles may be counterproductive."

gas and oil

President Putin's decision led to a rise in gas prices in Europe, as the gas price index rose by 19% before falling back down last Wednesday.

Brent crude oil prices also rose by about 5% to exceed $120 a barrel.

Russia supplies Europe with about 40% of its natural gas needs, which cast a shadow over Europe's response to the Russian invasion of Ukraine, as European leaders rushed since the outbreak of the war to reduce the region's dependence on Russian energy.

Putin said that Moscow will continue to supply gas in accordance with current contracts with European countries.

The list of countries "not friendly" to Russia includes members of the European Union, the United Kingdom, the United States, and other countries.

Commodity deals

And the American newspaper “The Wall Street Journal” says that most global commodity deals are made in dollars, or to a lesser extent the euro, and it is not clear how Russia can force its largest energy importing customer to change, especially since providing the ruble to European institutions may be difficult if not impossible. Western sanctions are also hampering the circulation of the Russian currency, along with new Russian financial measures that seek to prevent capital flight from the country.

"Paying Russia's arrears in rubles could be counterproductive," said Vinicius Romano, chief analyst at Rystad Energy.

"Insisting to pay in rubles may give buyers a reason to renegotiate other aspects of their contracts with Russia, such as the duration of the contract, to speed up their dispensation of Russian gas completely," he added.

Even if Russian energy buyers shift their payments to the ruble, there may be a limited impact. Russia has already asked its dollar and euro payments companies to exchange 80% of their revenue into rubles, a way to establish demand for the local currency, but it has the practical effect of throwing a burden Subsidizing the ruble on gas importers, rather than the central bank or local companies.

heavy pressure

Europe is under intense pressure to address concerns about the security of its energy supplies and its dependence on Russia.

The European Commission has proposed enacting legislation setting the minimum level of natural gas storage at 80% by the first of next November, to ensure an adequate supply of energy to complete the heating season next winter.

The Commission said that the minimum storage level will rise to 90% in subsequent years.

Ben McWilliams, a research analyst at Brussels-based Bruegel Research Center, said the EU should focus more on reducing its energy use.

Follow our latest local and sports news and the latest political and economic developments via Google news