Ruble Surges After Putin Ditches Dollars and Euros for Russian Oil and Gas
Earlier this week, 21WIRE highlighted the canny move by Russia to begin trading oil with India under a brand new rupee-Ruble mechanism – as a means of bypassing the global sanctions wall erected by the West in its economic war on Russia, and potentially anyone else who dares to defy the global diktats of the Washington-London-Brussels Axis.
Today, the Russian President Vladimir Putin may have just pulled one of the most adroit strategic moves in living memory – one which has the potential to rock the US dollar’s long-held privileged position as an unassailable world reserve currency.
Putin announced that from now on, Russia will only accept payments in their own currency, Rubles, for any future oil and gas deliveries to “unfriendly countries.” Presumably, this would include all EU members, the US, and anyone else who is dutifully going along with Washington’s orders on sanctioning Russia.
“I have decided to implement a set of measures to transfer payment for our gas supplies to unfriendly countries into Russian Rubles,” said Putin this afternoon during a televised government address.
According to the President, Russia will stop taking payments in currencies that have been “compromised,” namely US dollars and euros.
Immediately after the announcement, the Russian Ruble, after opening at 95, shot up in value against the dollar before hitting a three-week high peaking at 110, before settling down to 103 just before close. Experts believe this may be the beginning of a steady climb in value for the Russian currency as it may now officially achieve the status of a reserve currency – held perpetually in foreign banks in order to settle rolling purchases of major commodities, especially oil and gas. Meanwhile, the US dollar will steadily decline in comparative value as a result of shrinking demand.
It appears the brash US plan to strangle the Russian economy in hopes that the Russian people might suffer enough to rise up and overthrow Putin – may have just backfired in the most extraordinary way. In fact, just the opposite is happening: the Russian announcement sent some European and UK wholesale gas prices up around 15-20% – further hurting the working and middle classes and the SME business sector.
Speaking to the New York Times, chief eurozone economist Claus Vistesen from Pantheon Macroeconomics, said the action meant that every time a Western country bought a barrel of oil or a cubic meter of gas, it would be “propping up his domestic currency.”
“If you’re invoiced in Rubles, you’ve got to go out and buy Rubles,” he said. “I don’t know if there is a workaround,” said Vistesen.
In a single day of trading, the Russian currency has regained a significant chunk of its losses incurred in the immediate aftermath of the global sanctions war declared by Western countries just over 3 weeks ago.
Moscow’s announcement comes after the news this week that western banks froze over $300 billion in Russian foreign currency reserves, as part of Washington’s pledge to ‘crush the Russian economy’ as punishment for launching a military intervention in Ukraine on February 25th. Putin described this unprecedented move led by the US as theft, and further evidence that the dollar and euro “compromised themselves” and are now considered unreliable – not just for Russia, but for a significant portion of rest of the world too.
While some initial damage has been done to the Russian economy, it remains to be seen if the West’s strategy will end up being as effective as politicians promised it would be. Recently, the Russian central bank took a number of emergency measures to support the Ruble, including doubling interest rates to 20%.
All in all, Russian gas accounts for roughly 40% of Europe’s total consumption, with payments ranging between 200 million to 800 million euros ($880 million) per day so far in 2022.
Putin also reassured trading partners that, “Russia will continue supplying gas in the volumes fixed in earlier contracts.”
He also said that by freezing Russia’s assets abroad, the United States and the European Union have declared a “real default” on their obligations to Russia.
“Now everyone in the world knows that obligations in dollars can be defaulted,” said the Russian President.
His message to anyone dealing in dollars and euros: you too could be ‘cancelled’ at a moment’s notice, should you fall foul of the Western bloc.
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