Putin’s Official Counterstrike


Russian President Vladimir Putin announced on Wednesday that “unfriendly″ nations will now need to buy natural gas exports making use of Russian rubles. Putin said that sanctions and asset freezing have actually weakened the reliability of prominent Western currencies.

During a conference with Russian officials, Putin claimed that  “a number of Western countries made illegitimate decisions on the so-called freezing of the Russian assets, effectively drawing a line over reliability of their currencies, undermining the trust for those currencies.”  according to a report from the Associated Press.

“It makes no sense whatsoever,” Putin continued, “to supply our goods to the European Union, the United States and receive payment in dollars, euros and a number of other currencies.”

Putin, for that reason, stated that he was announcing steps to change settlements for “our natural gas, supplied to so-called unfriendly countries” to rubles.

The Russian president did not state when the new repayment strategy would enter into impact but advised the nation’s reserve bank to exercise the details.

The move may be an initiative to sustain the ruble after its value plunged due to the sanctions.

The Associated Press report observed that “despite severe Western sanctions, natural gas flows are still heading from Russia to Europe. The European Union is reliant on Russia for 40% of the natural gas it needs to generate electricity, heat homes, and supply industry — a key reason why the EU has not applied its sanctions to Russia’s energy industry.”

Some experts that the wire service talked to questioned whether the step will likely aid or boost the Russian currency in any type of meaningful means.

“Demanding payment in rubles is a curious and probably ultimately ineffective approach to attempting an end run around Western financial sanctions,” said Eswar Prasad, a professor of trade policy at Cornell University. “Rubles are certainly easier to come by now that the currency is collapsing. But exchanging other currencies for rubles will be quite difficult given the widespread financial sanctions imposed on Russia.

“The hope that demanding payment in rubles will increase demand for the currency and thereby prop up its value,” Prasad continued, “is also a false hope given all the downward pressures on the currency.”

Neil Shearing, group chief economist at Capital Economics, added, “It’s not an obvious move to me, since the (Russian) economy needs a supply of foreign currency in order to pay for imports — and energy is one of the few sources left.”

H/T Timcast

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