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26 Mar, 2022 11:37

Gas payments in rubles would backfire on EU sanctions – media

The bloc will have to buy rubles from Russia’s central bank
Gas payments in rubles would backfire on EU sanctions – media

The switch to rubles for gas payments, announced earlier this week by Russian President Vladimir Putin, would force the European Union to circumvent its own anti-Russia sanctions if it wants to keep the gas flowing in, Germany’s Der Spiegel reported, citing economy experts.

According to Düsseldorf economist Jens Südekum, in order to pay for gas deliveries, Europe would have to buy rubles from the Central Bank of Russia, which earlier this month was placed on an EU sanctions list. The measure prohibits any financial transactions between the Russian financial regulator and EU.

Putin is indirectly forcing us to bypass our own sanctions,” Südekum told the publication. Another expert, Klaus-Jürgen Gern of the Institute for World Economics in Kiel, added that, due to the importance of Russian gas to EU nations (40% of the bloc’s gas needs are covered by Russian imports), the proposed measure “will exert massive pressure on the Western world” and effectively “make their sanctions absurd.

Furthermore, if the change comes to pass, it will result in the rapid strengthening of Russia’s national currency, the ruble, currencies expert Peter Bofinger told the publication.

If Western gas consumers are now forced to buy rubles for dollars or euros, the demand for the Russian currency and hence its exchange rate will rise,” he explained.

Although the mechanism of switching to rubles for gas payments is still in the works, the announcement of the change alone has left Russia’s importers seriously puzzled, and dragged the ruble to a three-week high earlier this week. After all, under the worst-case scenario, Russia could turn off the taps on its gas pipes and, with no way to find an alternative source of the commodity fast-enough, that is precisely what is generally feared. 

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