Ruble rockets on gas currency switch

The ruble has surged on Wednesday after the announcement that payments for gas exports to certain Western countries will be switched to Russia’s domestic currency.

The Russian currency immediately rose to a three-week high of 95 rubles against the dollar, before settling below 100. It also gained 3.5% against the EU’s currency, trading at 110.5 rubles per euro.

The ruble plunged to historic lows earlier this month as unprecedented Western sanctions hit the Russian economy, dropping to record lows of 132 rubles per dollar and 147 rubles per euro on March 7. In mid-February, the currency’s exchange rate was around 75 rubles per dollar and 85 rubles per euro.

Russia plans to abandon all “compromised” currencies in gas payment settlements, President Vladimir Putin said on Wednesday. He added that illegitimate decisions by a number of Western countries to freeze Russia’s assets destroyed all confidence in their currencies. Therefore “unfriendly countries” will have to pay for Russian gas in rubles, Putin said.

The Russian president instructed the Central Bank and the government to determine within a week the order of operations for the purchase of rubles on the domestic market by buyers of Russian gas. Putin added that Russia will continue to supply gas in accordance with the volumes and according to the pricing principles concluded in the contracts. Only the currency of payment will change.

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