• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 days How Far Have We Really Gotten With Alternative Energy
  • 10 hours The United States produced more crude oil than any nation, at any time.
  • 1 day China deletes leaked stats showing plunging birth rate for 2023
  • 13 hours The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 5 days Bad news for e-cars keeps coming
Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

Russia’s Grand Plan To Undermine The U.S. Dollar

  • Vladimir Putin’s demand for “unfriendly” nations to pay for natural gas in Rubles has yet to impact gas flows.
  • The Kremlin has announced that this is a “prototype” and expressed confidence that the same policy will be extended to other goods and exports.
  • The demand for Rubles does not make much economic sense, but it may simply be a way for Russia to skirt sanctions.

Vladimir Putin’s insistence that “unfriendly” nations pay in rubles for natural gas is just the beginning of a Russian export policy that will see fewer U.S. dollars being used in transactions for goods, especially for energy, according to the Kremlin. 

Russia has set a March 31 deadline for the countries it considers “hostile” - including the United States, all EU member states, Switzerland, Canada, Norway, South Korea, Japan, and many others - to start paying in rubles for natural gas.   

Still, Europe continued to receive Russian natural gas via pipelines on Friday, even after Putin threatened European countries that Moscow would cut off gas flows unless buyers complied with Russia’s gas-for-rubles-only demand. 

Throughout last week, the Kremlin issued unclear - and at times, contradictory - messages, while European economies started to activate emergency plans in anticipation of a potential disruption to gas supply from Russia. Germany and Italy - major European economies and major importers of Russian gas - said last week that they had received assurances from Russia that they could continue paying in euros for the gas coming from Russia.   

Russia did not immediately cut off the gas supply to Europe partly because it is dependent on revenues from gas and partly because payments for gas delivered after April 1 are not due until later this month or early May. 

The continued gas supply to Europe eased concerns that Europe would find itself cut off from Russian gas, but those concerns could intensify again later this month and in May when payments to Moscow are due. 

The Kremlin, for its part, signals the gas-for-rubles demand is just the beginning of a switch to the Russian currency for Russian exports. 

“It is the prototype of the system,” Kremlin spokesman Dmitry Peskov said over the weekend on Russian state television, referring to the gas-for-rubles scheme. 

“I have no doubt that it will be extended to new groups of goods,” Reuters quoted Peskov as saying. The Kremlin spokesman did not provide any timeline for extending the rubles payments to exports of other goods. 

Last week, the Kremlin signaled that it could work on an idea to price all energy and commodity exports of Russia in rubles. 

This weekend, Peskov said Moscow was seeking a new global system that would not have the U.S. dollar as the dominant currency. 

“It is obvious that - even if this is currently a distant prospect - that we will come to some new system - different from the Bretton Woods system,” Peskov said. 

Russia’s demand for rubles for gas goes beyond economics, analysts told CBC News and The Associated Press. 

By demanding rubles for natural gas, Russia wants to score “a kind of political victory,” Stefan Meister, head of the program on international order and democracy at the German Council on Foreign Relations, told The Associated Press. 

“It wants to show that Putin dictates the conditions under which it exports gas,” Meister told AP. 

Payments in rubles could also send a message in Russia that the ruble is strong and Putin’s war in Ukraine is going according to plan, analysts also said. 


However, from an economic standpoint, the ruble payment is strange, other analysts note.

“Under normal circumstances, a country that is trying to prop up its currency and maintain imports from abroad would seek payments in hard currencies such as dollars and euros rather than its own currency,” Eswar Prasad, the Tolani Senior Professor of Trade Policy and professor of economics at Cornell University, told CBC News.  

It is possible that Russia could be using the demand for payments in ruble as a way to skirt Western sanctions, Prasad and other experts say.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Leo Kobrinsky on April 04 2022 said:
    I think we have nothing to worry about: Putin never does what he promised to do, right?
  • Douglas Houck on April 04 2022 said:
    A major key to the 'ruble for gas' payment system is that all the payments occur inside Russia, negating the option of someone freezing payments. The Russian want to ensure that they get paid.

    From Pepe Escobar:
    "What Moscow wants is to be paid at Gazprombank in Russia, in its currency of choice, and not at a Gazprom account in any banking institution in western capitals.

    That’s the essence of less-is-more sophistication. Gazprombank will sell the foreign currency – dollars or euros – deposited by their customers on the Moscow Stock Exchange and credit it to different accounts in rubles within Gazprombank.

    What this means in practice is that foreign currency should be sent directly to Russia, and not accumulated in a foreign bank – where it can easily be held hostage, or frozen, for that matter.

    All these transactions from now on should be transferred to a Russian jurisdiction – thus eliminating the risk of payments being interrupted or outright blocked."
  • Mamdouh Salameh on April 04 2022 said:
    By demanding payment in rubles for its gas and oil supplies, Russia aims to achieve many objectives.

    1- It will be a retaliation against Western sanctions with the aim of undermining them.

    2- It will strengthen the exchange rate of the ruble against other major foreign currencies by forcing buyers of Russian energy products to buy rubles in the open market to pay for them.

    3- It will be a huge blow against the petrodollar if Russia’s oil and gas exports are priced and sold in ruble and China’s oil imports are paid for in the petro-yuan. Between them, Russia’s oil exports and China’s oil imports account for more than 27% of the global oil trade. This will undermine the dominance of the petrodollar in the global oil trade.

    4- This will encourage counties to use other currencies to work around the sanctions.

    5- Moreover, Russia could ask for payment in rubles for other major exports like wheat, food materials, precious metals, fertilizers and processed uranium.

    6- There seems to be a substantial chance that the US economy will lose its role as the centre of international trade and the dollar its dominant position in international trade possibly leading to a major devaluation of the dollar.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News