BREAKING MARCH 23: Russian President Vladimir Putin instructed to transfer payment for Russian natural gas into roubles. As the head of state noted, the sanctions bombast of the collective West eliminated confidence in the currencies of the European Union and the United States.

Against this background, it no longer makes any sense for Moscow to conduct operations in dollars and euros, the Russian leader says. Now, in order to pay for energy resources, unfriendly countries will have to actively purchase roubles, which can positively affect the dynamics of the national currency and the state of the Russian banking sector. At the same time, Russia will continue to supply gas according to contract as it values its business reputation, Putin stressed.

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Putin says: ‘It makes no sense for us to ship our goods to the European Union and United States and receive payment in dollars, euros, and a number of other currencies. Therefore, I have decided to implement a set of measures to transfer payments for our natural gas supplied to the unfriendly countries to Russian roubles as soon as possible,’ the head of state said at a meeting with the government.

When paying for gas, Moscow will completely abandon all currencies that have compromised themselves, Putin stressed. According to him, this decision was made in response to the dishonest actions of Western countries to seize or freeze Russian assets.

‘The collective West has itself sabotaged the credibility of its currencies, crossing out the trust in these currencies. Both the United States of America and the EU declared, in principle, a denial on their obligations to Russia. And now everyone in the world knows that obligations in dollars and euros may not be fulfilled,’ Vladimir Putin said.

In accordance with the directive of the government, Gazprom will have to amend existing contracts. At the same time, it is planned to provide all foreign consumers with the opportunity to make transactions in roubles and buy Russian currency on the domestic market of the Russian Federation. The President instructed the Cabinet of Ministers and the Central Bank to determine the procedure for such operations within a week.

‘At the same time, I want to separately note that Russia will continue to supply natural gas in accordance with the volumes and prices, according to the pricing principles fixed in the contracts concluded earlier. Unlike some colleagues, we value our business reputation as a reliable partner and supplier,’ the head of state added.

Recall that since the end of February 2022, the United States, the European Union and a number of other states have been introducing ever new economic sanctions against Russia. This is how the West reacts to the military special operation carried out by Moscow to protect the republics of Donbass from aggression from Ukraine.

In total, almost 4.4 thousand restrictions were introduced against Russia over the past month. Restrictions, in particular, affected the Russian banking industry and trade. At the same time, Europe stopped the certification of the Nord Stream 2 gas pipeline. Along with this, many international companies announced their withdrawal from the Russian Federation. Half of the Central Bank’s gold and foreign exchange reserves (worth $300 billion) were frozen.

‘The lifting of sanctions from the Central Bank for Russia is now a fundamental point. If foreign partners have to pay for gas in our currency, then they will be able to purchase a significant number of roubles only from the (Russian) Central Bank. In practice, this means that the West will need to remove the Russian Central Bank from sanctions, otherwise they will no longer be able to buy our gas, ‘Igor Yushkov, an expert at the Financial University under the Government of Russia, told RT.

At the moment Russia is the largest supplier of hydrocarbons to Europe. According to the latest Eurostat estimates, the EU buys approximately 41% of its gas and 27% of its oil from Moscow. Against this background, the countries of the region do not have the opportunity to promptly refuse to import Russian energy raw materials, Yushkov believes.

‘Europe needs to get through the next heating season, as well as maintain normal electricity generation for the current moment. It is impossible to fulfil these tasks without Russian gas. Moreover, the conversion of gas payments into roubles can only be the first step. It is possible that if the sanctions rhetoric intensifies, the authorities will make similar decisions on oil or coal,’ the specialist added.

Market reaction: It is curious that after the president’s announcement about changing the procedure for paying for gas, the Russian currency noticeably strengthened on the Moscow Exchange. Simultaneously, the dollar exchange rate fell by 8.3% and for the first time since March 2 reached 94.99 roubles. The euro exchange rate at the same time fell by 5.6% – to 108 roubles.

At the same time, gas prices in Europe began to rise sharply. So, during the auction, the cost of fuel at the TTF hub in the Netherlands rose by more than 20% and at the moment reached €119 per MWh, or about $1,350 per 1,000 cubic meters. This is evidenced by the data of the London Stock Exchange ICE.

‘Foreign players are afraid that at first it will be problematic to pay for gas in roubles. Therefore, already they are trying to make as many reserves as possible, while it is still possible to pay in dollars. This is why prices have gone up. The rouble, in turn, began to strengthen, as traders understand that the Russian currency will become more in demand, and they want to buy it at an attractive rate for them,’ Igor Yushkov explained.

A similar point of view in an interview with RT was expressed by a senior analyst at Esperio Anton Bykov. Moreover, according to the expert, the transition to gas payments in roubles may have a positive impact on the work of the Russian banking sector.

‘Now importers of Russian gas from unfriendly countries will have to buy roubles and transfer these funds to the accounts of Russian banks. This will create a mechanism to support the rouble exchange rate by $30-40 billion a year, which will additionally protect the financial system and economy from new shocks. In addition, the level of liquidity of the banking industry will also increase,’ Anton Bykov emphasized. Source

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