Putin only asks rubles for gas
Russian President Vladimir Putin has ordered state energy company Gazprom to only handle energy supplies to western countries in rubles. According to experts, with that decision he wants to sow discord in the West and hopes to find allies. However, the chances of this happening are slim.
Russia announced just over a week ago that all “unfriendly countries”, by which he mainly refers to Western countries, will soon have to pay for their gas and oil in rubles. Otherwise nothing will come their way, Putin threatened.
Although many initially thought little would come of it, Putin seems to be holding his ground. He instructed energy company Gazprom to handle all payments in rubles from now on.
Still, experts don’t think the West will ever use the Russian currency to buy energy.
Putin only asks rubles for gas: ‘He wants to divide the West’
Sanctions should be eased to make payments in rubles
ABN AMRO analyst Hans van Cleef refers to recent statements by the G7, the seven most developed countries in the world. They said in a joint statement that there can be no question, because it would amount to a breach of contract.
It has been agreed that payments will be made in dollars.
Apart from that, sanctions against Russia would have to be eased to make that happen, because the current restrictions make it almost impossible to get rubles outside of Russia. And none of the countries thinks that easing sanctions is a good idea right now.
The chance that Russia will turn off the gas tap is small, because that would severely limit the country’s income.
‘Russia wants to put pressure on the West to ease sanctions’
The strange thing about the Russian action is that Russia needs dollars and euros to pay off its foreign debts. Why is the country doing this then? In the first place, according to Jan Lambregts of Rabobank, Putin wants to strengthen the sharply depreciated ruble.
If other countries want to pay with rubles, they have to buy that currency too, which increases its value. “And Russia has plenty of foreign exchange reserves,” he says.
But it is also a way of pitting western countries against each other. “If a few countries go along and decide to pay in rubles, Russia will bind more countries.
That way it will be easier to put pressure on the West to ease the sanctions,” he explains. For the time being, Bulgaria is the only country that may be willing to pay in rubles to guarantee security of supply. The other countries have no such plan.
West will not get rid of Russian energy faster because of this
Will this cause the EU or the US to run off oil or gas from Russia faster than planned, ultimately exploding in Putin’s own face? Probably not. “The turn away from Russian gas has now started, but we are still very dependent on Russia, so that takes time anyway,” says Van Cleef.
Lambregts agrees. “The discussion does remind us how dependent we are on Russia, but I don’t think the strategy is changing now.”
Earlier this month, the US, UK and EU decided to significantly reduce imports of oil, gas and coal from Russia this year. In any case, the EU wants to get rid of Russian energy by 2030.
Putin only asks rubles for gas
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