Pay In Roubles?

Vladimir Putin has demanded payment in roubles for Russian gas sold to “unfriendly” countries, setting a deadline of 31 March.

It is not clear whether he plans to tear up existing contracts that set the price in euros or dollars, but Germany, which relies on Russia for 40% of its gas supplies, is not taking any chances, warning large industrial gas users that a standoff is possible and rationing is one possible outcome.

In todays video we ask why payment for Russian exports in rubles has become a major issue for the Kremlin, and whether Putin could extend the plan to include exports of oil, grain, fertilizers, coal, metals and other key commodities.

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[mariusa.]

The effect of Putin's decree is that Gazprom, at no point in time, will ever hold Euros or US Dollars. The Euros or dollars are always held in the name of the gas buyer, so if those funds were frozen for any reason, it would be the gas buyer's funds that were frozen, not Gazprom's. Gazprom would then say that the invoice for gas had not been paid, since the bank is unable to convert the foreign funds into rubles, and therefore Gazprom's invoice has gone unpaid. The buyer, at that point, would be in breach of contract, and future gas deliveries would be halted.

[wtf_usa]

Five stages of grief:
denial.
anger.
bargaining.
depression.
paying in rubles.

[NoName-brpb]

You did not say that gas payments now remain in German banks or others and are not transferred to Russia. In fact, the payment is frozen and Gazprom has no access to the money. And after the decree, the money will be kept in a Russian bank and no one will be able to take it away.

[Meitti]

0:20 not all of EU, nordic region tends to be less reliant because they rely more on nuclear power than the western european countries. Turns out Germany decommissioning those nuclear plants was a really bad idea.

[dominikvonlavante]

Sorry Patrick, but you missed the essential part of why Russia is doing this. Currently, the Euro holdings of Gazprom are held in a Nostro Account in Luxemburg and are of limited use, since these funds can only be used to pay for things within the Eurozone. The big difference is that with the new Gas-For-Roubles scheme, EU-Entities would be forced to perform the Ruble transaction in their name on their account. The way I read the EU-sanctions, this would constitute an illegal interaction with the Central Reserve Bank of Russia.

It is essentially a clever scheme to make Europeans break their own sanctions to get hold of gas and to recapitalise the Russian central bank. It is also a change of all nat. gas delivery contracts to Rubles for future shenanigans, but that is almost only a mere secondary issue...

[johnsnow]

such a shallow analysis.... if now Rubbles are required for gas payments- there is a demand for Rubbles.

[thatotherguy]

By FAR the funniest finance channel...also informative

[wamnicho]

Hey man, what is the point of continuing to sell something when you cant access your payment, you're basically giving away the goods for free. Screw the contract, if I was Putin, I wouldn't have even waited this long, the gas would have been shut down on the day they froze Russian reserves.

[JohnJones-lbxo]

Russian Energy exports are about $300B. GDP is $1.5T. Energy isn't "the entire Russian economy" by any means.

[nikogrujic]

Its rubles, or ASS or grass, nobody RIDES for free !! Greetings from Serbia 🇷🇸

[simonescelsa]

There is more to the Ruble recovery story that what is told in this video, capital control has minor effects on the devaluation or re-valuation of a currency (just look at Turkey). With this proposal the Ruble will be backed by hard assets (all commodities that Russia exports), like the USD has been supported with the petrodollar system (now in the process of being dismatled by Saudis, China and Russia).

[elizabethtamp]

Russia stated: payment in gold, Rubles or bit coin, actually. The Russians also valued a kilo of 99.99 gold in Rubles for transactions that should have made the ComEx, LBMA sit up and the FED, I am sure the Fed doesn't want a gold (or commodities) backed Ruble, Ouch! That a genuine hard currency. They are already talking of the Gold Trade Note in Shanghai for oil etc.
The IMF stated: Rubles trade will start to undermine the US$ as countries stack Rubles in their reserves to pay for commodities.
As for contract busting most all sanctions placed on Russia, at the whim of the Americans, could be viewed as contract busting or defaults. You were not playing with a straight bat today, Patrick.
All these sanctions and Western emotional "news" clips are not going to deter Russia because one of her route complaints is American Aegis Ashore short-range nuclear missiles based in Poland and Rumania with the thoughts of more missiles with shorter flight time to Russia cities is aberrant to her.
All the bombing of Japan and Germany didn't break their spirit. Governments in existential mode will force its citizens to endure much.
That the West stops shipping Maseratis, gucci clobber to Russia is meaningless to Mr Average Ivan in the hinterland, it doesn't matter a jot because he is totally self-sufficient. Russia grows all its own food and sells surpluses. UK and Mr Brummie doesn't.
Geopolitical: China will sale and support Russia as a Bulkanized Russia would mean America Aegis Ashore missiles on China's northern border. Ouch! As proof, I offer that wicked odious state N.Korean, although a big embarrassment to China at times, NK is kept alive by China as the don't want American bases a long the Yangtze River, do they?

[ApocDevTeam]

I can't help but feel a lot of these sanctions are going to hit average and low income people in Europe very hard. We already have record inflation, now we'll have food shortages (rising prices), energy shortages and perhaps even another migrant crisis if Africa gets a famine (they are heavily dependent on Ukraine and Russia for their food). Once the effects of the war and the sanctions start to take hold I expect European voters to quickly change their attitudes towards escalation vs Russia. Right now people are still fine with all of this going on, but only because the severe negative consequences haven't filtered through yet.

[psychoja]

11:11 Buy non-Russian commodities from where? All oil producers already said that they can't replace the volumes that Russia provides. That would spike the price by who knows how many times. Neon, diamonds, fertilizers, metals, foods... buy from where? At which prices? China and India didn't impose sanctions and will buy all of the resources from Russia at lower prices than market price will be = lower price of the products they will make = way more competitive than EU/US prices will be.

[paulb]

If Germany has a grand plan, why isn't this plan known?

[buriedpet]

Love the dig at bitcoin. You’re the best, Patrick. I can’t thank you enough for giving us your time in these videos. Your words are invaluable. I’m putting all my money in call option orders with the underlying being your subscriber count.

[MAtogable]

would you call freezing foreign reserves and seizing assets a "breach of contract" as well?

[fllev]

The silliness of Germany and Austria relying on Russian gas for energy lies in the fact just hectares of PV panels spread throughout southern Spain, France, Italy and Greece would supply all the energy they need and Wacker Chemie, based in Germany and Austria is one of the largest producers of Solar Grade Silicon in the world!
Not to mention Norway's REC Silicon production capacity's ability to help speed up the transition process!

This represents less than 0.2 percent of the EU's southern area. Meaning that with wind and solar the EU can be energy independent in short time and should have increased their renewable energy efforts by more than 10 fold over the past decade.

[Rizhiy]

0:48 I am not so sure about that. What are they gonna spend those Euros on? Sanctions are preventing them from spending anything on most foreign brands, so foreign currencies are a bit useless to them now.

[JBinsingapore]

When you deconstruct the sanctions, their seems to be a far bigger shock to their ability to spend dollars (ie buying stuff from the West) than to receive dollars (ie by selling oil). Logically this puts huge upward pressure on the ruble while killing economic growth