Rubles for hostile countries, bitcoins and national currencies for friends. Where the Kremlin frames a state may have an unexpected consequence: how it will have to pay its bill for imported oil and gas from Russia. It sounds strange, but the move, calculated and still to be outlined, would seek to strengthen the federation’s position in times of war.
Moscow’s approach is clear. Those nations that are perceived as “unfriendly” will pay for their imports of the precious gas in the official currency of the Federation, while countries such as China or Turkey, which have not participated in the sanctions imposed by the West for the invasion of Ukraine, will would give them a larger margin and would even accept cryptocurrency.
The announcement was made by Pavel Zavalny, Chairman of the Energy Committee of the Russian Duma. During a recorded press conference, the leader revealed that Moscow is assessing that “friendly” countries enjoy greater flexibility when paying for gas and oil. They could do it in their own fiat currency, such as the Turkish lira or the yuan; or with a bitcoin exchange.
“In gold or the currency that suits us”
Although the measure is still being valued, it stands out for the context in which it is announced. Zavalny’s comment comes shortly after the president of the federation, Vladimir Putin, announced that he will not accept that the gas that Russia sells to Europe continue to be paid in dollars or euros. It will have to be done directly in rubles. The approach was confirmed by the Duma leader himself, who stressed that the measure is aimed at the “unfriendly” nations.
“Gas is just the beginning. This will also affect other resources. If they want to buy, they should pay in hard currency, and that for us is gold; or in currencies that suit us, which is the national currency,” Zalvany stressed. Beyond the political message, his statements had a clear effect on the value of Bitcoin. As detailed by CNBC, the price of the cryptocurrency increased when the Russian leader’s comments began to circulate and stood at $44,000.
The decision to demand payment in rubles would affect countries that have applied sanctions to punish the Russian economy for the war, such as those that make up the European Union, Russia or the United States, which has already prohibited imports of Russian oil and gas. On the opposite side, that of “friends”, Zalvany cited China and Turkey, “not involved in the pressure of sanctions“.
The million dollar question is: What is Moscow looking for with both measures?
One of the reasons could be boost the price of the ruble, to revalue the Russian currency, which has experienced a sharp drop in recent weeks. The measure would be important when it comes to paying the country’s debt and interest. After the announcement, in fact, the currency strengthened against the dollar and the euro. To get rubles, customers who want to pay for gas will have to exchange their currencies for those of the federation with favorable conditions for Moscow.
Another key would be to ensure that Russia’s banking system is not completely disconnected from Swift, the main tool used by international financial institutions to send payments safely and quickly. At the beginning of the month the European Union de facto left two large entities, Sberbank and Gazprombank, for their role in energy operations.
The move takes advantage of one of Russia’s strengths, its considerable weight in the energy supply at the international level and dependence on other countries. More than 40% of the natural gas that the European market receives comes from the federation presided over by Vladimir Putin. The link is even greater in the case of Germany, which has already branded the Kremlin’s decision to demand that hydrocarbon bills be paid directly in rubles as a “violation of contract.”
As for Bitcoin, Moscow could take advantage of the digital asset to prop up its wartime economy as well. “Russia is quickly feeling the impact of unprecedented sanctions. In many ways, Bitcoin is considered a high-growth asset,” David Broadstock of the Singapore Institute for Energy Studies told the BBC.
Another fundamental factor is Beijing’s relationship with Bitcoin. “One of the main ‘friendly’ trading partners of Russia is China and the use of cryptocurrencies is prohibited there. That clearly limits the potential to pay with Bitcoin,” says Broadstock, who also points out that, compared to other traditional currencies, the cryptocurrency involves “considerably higher risk”. A good example of its volatility is that this same year its value has oscillated 30%.
Images Carmen Rodriguez (Fkickr) and Aleksi Räisä (Unsplash)
George is Digismak’s reported cum editor with 13 years of experience in Journalism