Will Russia defeat the dollar and revive the rouble, or will it cut off Europe’s Gas?

Written by – Elijah J. Magnier:

Russia will not be able to dissociate itself from US global unilateralism as long as it uses the US currency as a financial means for its business transactions. This dependence on the US dollar naturally puts Moscow at the mercy of the United States of America and its sanctions. The same applies to the European Euro, directly linked to European politics, which became a hostage to the US, as shown by the steps taken during the war in Ukraine. Indeed, most of President Joe Biden’s decisions were followed by Europe despite its significant economic losses and US gains. This was evidenced by the West’s freezing of about $300 billion of Russia’s hard currency and gold deposited in Western banks.

For this reason, Russia began several years ago to adopt the local currency to exchange payment for parts of its energy and trade with China, Iran, India and Pakistan. However, President Vladimir Putin warned the 48 countries classified as “non-friends” that the daily Russian gas bill, estimated at hundreds of millions of euros, dollars and pounds sterling, must be paid in Russian roubles starting from Thursday, 31 March. The ultimatum issued by the Russian President is either to pay the price of oil, gas and coal in roubles or not to sell at all if Europe fails to abide by Russia’s terms. This will inevitably lead to a global crisis or significantly boost the Russian currency, compensating for the effect of western sanctions on Moscow. The Russian decision has caused a storm of European statements from the leaders of these countries, which will face a dilemma from which they have no way out except to succumb or suffer the consequences of a sharp shortage of gas and oil.

President Putin clarified that this is only the beginning of the Russian measures. The Russian President said that alternative terms of the contracts would not be reviewed to allow other currencies than the rouble. This means that the pricing will be unchanged, and the buying companies will pay for the Russian gas at the original dollar price but in Russian currency.

 Deputy Prime Minister Alexander Novak also said that it has become unacceptable to trade oil against the dollar and the euro, and in the future, it is necessary to switch to settlements in national currencies for all other products.

Difficulties may arise when European institutions begin their search for companies in the stock exchange market from which they can buy roubles since Europe will have to ensure that these companies are not subject to sanctions. Europe would not be able to buy the rouble from the already sanctioned Russian Central Bank, with half its gold and foreign exchange reserves frozen.

Reactions emerged from the European continent, which initially rejected the “blackmail” imposed by President Putin and requested that the gas bill not be paid in the Russian currency. The first reaction came from French President Emmanuel Macron, who said that Europe cannot deal with the rouble and that contracts with Russia do not provide for this condition, considering it a violation of the gas agreement. This was followed by several statements from the leaders of Eastern European countries, which categorically refused to deal with the Russian currency but failed to offer an alternative to meet their needs.

 Western countries cannot assume that Russia will remain passive after challenging Moscow on many fronts. Europe has been sending weapons to kill Russian soldiers on the Ukrainian battlefield. The EU froze Russia’s financial assets in its banks and joined the US in imposing the most severe economic and financial sanctions. Indeed, President Putin will not back down or show any sign of weakness for fear of losing his credibility and consistency in this war. Thus, the Russian President ensures that sanctions are painful for both Russia and the West. Therefore, President Putin will not give up so quickly and will defend his country’s economy in the long term by conveying some pain to nations no longer considered friends of Moscow.

President Joe Biden said that he “knows that sanctions against Russia will not deter war, because they never deter. Rather, the goal of sanctions is to increase Russian pain.” Indeed, the Russian leadership will suffer from these sanctions because Moscow did not anticipate all the numerous steps taken by the West since the beginning of the war. However, the world will share some of the pain.

It is natural that Europe will not be able to buy the rouble – which is expected to become an international currency – from the market so quickly, nor amend the old agreements with Russia. This indicates a real crisis that will strike the European continent hard unless it chooses to release the frozen Russian funds as a negotiating card that America will undoubtedly reject. It might indicate a weak or complacent position in front of President Putin. 

Thus, a significant energy crisis is looming on the horizon, including the Russian economy, which will be deprived of billions of hard currencies (Dollars and Euros) that it receives monthly from Europe. The old continent cannot expect Russia to pity it or consider its need for oil and gas because all these countries – even if they are reeling under American blows – contribute to prolonging the war that Moscow decided to fight. Furthermore, Europe has decided to diversify its sources of oil and gas purchases and fall back on the United States and other gas producers countries to buy the more expensive liquefied gas (LNG). Europe has acquiesced to America’s request to prepare supplies and tankers for liquid gas. The European Union countries – which import natural gas through pipelines that deliver the gas at prices much lower than what they will buy from the US and 

Subscribe to get access

Read more of this content when you subscribe today.

Comments are closed.