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Russia’s Foreign Minister Sergey Lavrov has issued a statement to India Today clarifying the rubles for gas mandate that has created confusion among Russia’s gas buyers, RT has reported on Tuesday.
Buyers purchasing Russia’s gas will have to pay Gazprombank, an independent institution. They will no longer be able to pay for gas using Gazprom’s bank accounts abroad—precisely because those funds could then be frozen by sanctions.
According to Lavrov, Russia’s demands to change the payment method for nat gas exports to rubles is “obvious and understandable” given Western sanctions, which have frozen half of Russia’s foreign assets.
“They will pay the same amount that they owe under existing contracts, but they will pay through a special account that they will have to open in this bank,” Lavrov clarified.
Buyers can still, therefore, pay in the currency of their choice. But Gazprombank will convert the payment into rubles. Gazprom would then be able to access the funds in rubles, assured that those funds would not be subject to sanctions.
“They won’t be able to keep this money in their banks. They will still pay in euro or dollars, but we will have guarantees,” Lavrov added.
Russia had 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, although the EU has rejected Putin’s demands for payments in rubles.
Russia did not immediately cut off the gas supply to Europe after April 1, 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.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.
For Russia, payment in rubles will strengthen the exchange rate of the ruble against other major foreign currencies and make it an important energy currency.
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. Moreover, this will encourage counties to use other currencies to work around the sanctions.
Furthermore, Russia could ask for payment in rubles for other major exports like wheat, food materials, precious metals, fertilizers and processed uranium.
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