Russian President Vladimir Putin has threatened to terminate exports and deals with the West and add certain individuals and entities to the Kremlin’s sanctions list in retaliation for sanctions imposed by the United States and the European Union.
Russian President Vladimir Putin introduced a package of economic measures on Tuesday to retaliate against international sanctions placed on Moscow.
The decree, published on the Kremlin website, was “in connection with the unfriendly actions of the United States and its allies that violate international law and aim to illegally deprive the Russian Federation and Russian legal entities of their property”.
The Cabinet of Ministers now has 10 days to determine who will be put on the sanctions list.
Sanctioned individuals will be prohibited from carrying out transactions or signing external trade contracts, as well as from exporting products and raw materials.
According to Russian news agency Itar Tass, the Russian Finance Ministry and Central Bank will “have the right to give official clarifications on the application of this decree”.
The sanctions threat comes as the European Union warns its members against paying for Russian gas in rubles or using a Kremlin-designed loophole through Gazprombank, where payments in other currencies are then transferred to a separate ruble account, going through the sanctioned Russian Central Bank.
It also comes a day after the bloc alerted members to be prepared for Russia to cut off gas to all European Union countries in retaliation for its refusal to make payments in rubles. Last week, Russia cut off gas supplies to Poland and Bulgaria.
Threats of retaliation are mounting ahead of May 9th, Russia’s Victory Day celebrations–a day observers expect Putin to be hoping to be able to demonstrate a significant victory in Ukraine or over the West.
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By Charles Kennedy for Oilprice.com
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But because Russia is a major producer and exporter of highly essential commodities ranging from energy to wheat, agricultural products and fertilizers to processed uranium and precious metals essential for the functioning of the global economy, its retaliation could adversely impact food prices and commodity prices thus pushing the global economy toward deep recession.
Moreover, President Putin’s demand of payment in rubles for oil and gas supplies to the EU could precipitate a division within the economic bloc and an eventual fracturing of it. It is also opening the door for other national currencies to be used for payment for oil, gas and coal thus undermining the petrodollar as the oil currency and benefiting the China’s petro-yuan.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London