Russian President Vladimir Putin announced on Wednesday that Russia will no longer accept dollar or euro payments for gas supply to the EU, giving Russian authorities a week to devise a new ruble system. .. “I have decided to switch to ruble payments for gas supplied to hostile countries and implement a series of steps to abandon currencies infringed by all regulations,” the Russian president said at a meeting. rice field. The government meeting explained that it was a reaction to the freeze of Russian assets in the west due to the attack in Ukraine.
Central Bank of Russia establishes new system within a week
Vladimir Putin urged the central bank and government to be “clear and transparent” “within a week” and to establish a new system including “acquisition of rubles in the Russian exchange market”. The announcement collapsed on February 24 and immediately affected the rising Russian currency against the euro and the dollar, while Russian troops entered Ukraine. The President of Ukraine immediately condemned Moscow’s “economic war” to “strengthen the ruble.”
“But the West could hit Russia with an oil embargo that plunges Russia’s economy,” Warody Mill Zelensky, Chief of Staff of President Volodymyr Zelensky, warned about Telegram. “This is now an important economic battle, and the West must collectively win it.”
Other Russian exports may be affected
Vladimir Putin has also been affected by other Russian exports as Russia’s foreign minister Sergei Viklov has frozen about $ 300 billion in Russian reserves held abroad by the West, a measure he called “theft.” I hinted that I would receive it. “It’s clear that delivering our goods to the EU, the US and receiving dollars, euros and other currencies no longer makes sense to us,” said Vladimir Putin.
So far, Russian hydrocarbons have largely escaped heavy western sanctions on Russia. Indeed, Washington has proclaimed an embargo on Russia’s gas and oil. However, the latter continues to float towards Europe, relying heavily on Russian hydrocarbons and Moscow’s first market. However, the European Union is also currently considering a Russian oil embargo.
Russia has been advocating the de-dollarization of the economy for years
Several definitive international summits are expected to suggest new Western sanctions. Moscow has been advocating the de-dollarization of the economy for years as part of its efforts to reduce its vulnerability to sanctions. In March 2019, Russian public gas giant Gazprom announced that it was the first to sell ruble gas to European companies.
Deputy Prime Minister for Energy Alexander Novak said, “Without Russia’s hydrocarbons, it is absolutely clear that the gas and oil markets will collapse if sanctions are imposed. Rising prices for energy resources are unpredictable. There is a possibility. “
Ukraine condemns “economic warfare”
After the announcement of Vladimir Putin, Alexander Novak said that “we must act more aggressively in trading in our own currency,” which is considered “more reliable” than the dollar and euro. It was “a historic decision (…) a step towards the de-dollarization of our economy” and welcomed Speaker of the House Viacheslav Volodin.
While demanding a European oil embargo, the Ukrainian president immediately condemned Moscow’s “economic war” to “strengthen the ruble.” Does this decision support the ruble in the long run? “As is often the case with Putin, it’s hard to know what the main purpose is,” said Craig Erlam, an analyst at Oanda.
Experts say the ruble is hardly “positive”
Timothy Ash, an analyst at Blue Bay Asset, finds it “difficult” to see if the ruble is positive. According to him, Putin “essentially tries to deal with the Western countries that have authorized the Central Bank of Russia, but it only complicates transactions with Russia for energy supply. It is Russia’s energy. It just accelerates the diversification from. “
Will the Ukrainian conflict seriously hurt the role of the dollar? This is “far from the truth,” said Neil Shearing, chief economist in capital economics, in a memo. “It could accelerate the development of smaller trade zones that use alternative currencies, but these do not match the size and reach of the dollar.”
Dangers of Gazprom
Investment group Loko Invest points out the danger that Gazprom will run out of foreign currency to meet its future debt. He estimates that countries that Russia has declared “hostile” account for more than 70% of Russia’s energy exports.
However, according to Andrew Wyeth of the Carnegie Foundation, “Putin knows how to create situations that are very unpleasant to the enemy,” and “uses them.” Wednesday’s “surprise” announcement raised oil to $ 120, along with a decision to cut exports via the pipeline.