(News) What consequences will the transition from payments to rubles for Russian gas have and how is the world reacting to the decision

[Askor lml]

"The West has really drawn a line under the credibility of its currencies, erasing confidence in them," Russian President Vladimir Putin said on Wednesday.

Russian President Vladimir Putin ordered on Wednesday to accept payment for the supply of Russian natural gas to unfriendly countries — which imposed sanctions against the nation — only in rubles.

In announcing the move, the Russian president said that several Western countries have made "illegitimate decisions" in recent weeks to freeze Russian assets and "the West has really drawn a line under the credibility of its currencies, erasing confidence in them." The president added that both the US and the European Union have breached their obligations to Russia in principle. "And now everyone knows that obligations in dollars and euros may not be met," he noted.

Shortly after the announcement, Russia's deputy prime minister, Alexander Novak, stated that the sanctions undermine confidence in payment in dollars and euros for oil, adding that, in the long term, it is necessary to move to transactions in national currencies also in this area.

The price of gas in Europe did not take long to react to Putin's statements and exceeded 1,350 dollars per 1,000 cubic meters in the stock market operations of this day.

What consequences are to be expected?
Some experts claimed that the decision may help support the ruble in the conditions of Western sanctions against the Russian economy.

The positive dynamics of the Russian currency was observed shortly after Putin's speech. Thus, the dollar fell below 95 rubles at 15:27 (Moscow time) on the Moscow Stock Exchange. Its minimum value stood at 94.9875 rubles.

The international analyst in the field of transportation and storage of hydrocarbons, Vladimir Demidov, told the Russian economic portal RBC that the decision "will lead to a strengthening of the ruble", adding that, at the same time, Russia will accumulate a significant volume of euros that European countries are going to leave in the country buying rubles. "It is a positive factor that will strengthen the ruble as the national currency," he stressed.

"The transition to rubles is the stabilization of the exchange rate of the national currency," said Viktoria Perskaya, director of the Institute of International Economic Relations Studies of the Financial University attached to the Russian Government, quoted by Rossíiskaya Gazeta.

It should be remembered that the Russian authorities ordered exporters at the end of February to sell 80% of the foreign currency they receive on the domestic market. Meanwhile, several analysts were of the opinion that the new de facto measure is equivalent to the 100% sell-off rule. In this regard, the investment director of Loko-Invest, Dmitri Polevoi, told RBC that there is not a big difference between 80% and 100%, so the new measure should not significantly influence the ruble exchange rate. . In addition, the investment strategist at the Arikapital company, Sergei Suverov, said that a significant strengthening of the Russian currency should not be expected.

Former Russian Central Bank Chairman Sergei Dubinin said the decision may improve the ruble's exchange rate in the short term, but not in the long term.

As for the effect of the measure on the energy resources market, Konstantin Simonov, head of the National Energy Security Fund, argued that in the long term, the transition to rubles destroys the dollar payment system, and therefore " the influence of the dollar in the international market".

At the same time, the move may become the deed that will speed up the European Union's actions to diversify its gas supply sources, Demidov said.

In several long-term contracts, the currency in which payments are made is specified and Símonov affirmed in this sense that, after the decision of the Russian authorities, there is a risk that Europe will accuse the country of a violation of contract law.

In turn, Sergei Kolobánov, deputy director of economics for the fuel and energy sector at the Center for Strategic Developments, told RIA Novosti that the transition to payments in rubles will not decrease the demand for Russian gas since "it is practically impossible" to replace it with other supplies from other countries quickly.

reactions
Several countries have already reacted to the passage of the Russian authorities.

The head of the Austrian company OMV, Alfred Stern, said they will continue to pay in euros as he has "no other contractual basis", adding that he will wait until someone contacts them about it.

Francesco Giavazzi, economic adviser to the Italian prime minister, pointed out that "his point of view of him is that we pay in euros because paying in rubles would be a way to avoid sanctions," says Bloomberg.

Meanwhile, German Energy Minister Robert Habeck has dismissed the move as a violation of existing contracts and promised to take up the matter with his European partners.

However, Bulgarian Energy Minister Alexander Nikolov indicated that his country is ready to pay for gas in Russian national currency.

For his part, the Minister of Infrastructure and Regional Development of Moldova, Andrei Spinu, believes that Putin's statements do not refer to his country, noting that the contract between Moldovagaz and Gazprom allows payment in dollars, euros or rubles. . "I understand that this does not affect the contractual relations between Moldovagaz and Gazprom," he said.

Meanwhile, Serbian President Aleksandar Vucic stated that the decision on ruble payments creates many problems for his country. "Some think it's genius in the geopolitical game to counter the petrodollar [with the ruble], along with the yuan. The Germans have already said it's a reason to break the deal," he said.

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