Putin announces gas currency switch for ‘unfriendly countries’

Rouble firms after Putin announcent that Russia would start selling its gas to ‘unfriendly countries’ in roubles.

Russia has taken a hit from unprecedented Western sanctions over events in Ukraine, what it terms a ‘special operation’, that started on February 24 [File: Mikhail Klimentyev/AP]

Updated at 0654 on 23 Mar 2023

The Russian rouble briefly leapt to a three-week high past 95 against the dollar on Wednesday in Moscow, before settling close to 100, after President Vladimir Putin said Russia would start selling its gas to “unfriendly countries” in roubles.

The potential ramifications of that move, which Putin ordered his government to sort out in one week, could boost the Russian currency, with a host of European countries still dependent on Moscow for much of their energy supplies.

By 13:13 GMT, the rouble was 3.4 percent stronger against the dollar at 100.02, earlier clipping 94.9875, its strongest since March 2. It had gained 3.5 percent to trade at 110.50 versus the euro.

The rouble had stabilised near 105 to the dollar in recent sessions after falling to a record low of 120 in Moscow this month and even further on the interbank market to 150.null

Russia has taken a hit from unprecedented Western sanctions over events in Ukraine, what it terms a “special operation”, that started on February 24.

Before that, the rouble traded at about 80 to the dollar.https://www.youtube.com/embed/tkyUKGCdf0I?version=3&rel=1&showsearch=0&showinfo=1&iv_load_policy=1&fs=1&hl=en-US&autohide=2&wmode=transparent

Putin made the announcement at a meeting with top government ministers televised on Wednesday.

He said Russia would start selling gas to “unfriendly” countries in roubles, after a freeze on Russia’s assets by foreign nations had destroyed Moscow’s trust.null

European countries’ dependence on Russian gas and other exports has been thrown into the spotlight since Russia’s invasion of Ukraine.

“Russia will continue, of course, to supply natural gas in accordance with volumes and prices … fixed in previously concluded contracts,” Putin said at a televised meeting with top government ministers.Sign up for Al JazeeraWeekly NewsletterThe latest news from around the world.Timely. Accurate. Fair.Sign up

“The changes will only affect the currency of payment, which will be changed to Russian roubles,” he said.

Putin said the government and central bank had one week to come up with a solution on how to move these operations to the Russian currency and that gas giant Gazprom would be ordered to make the corresponding changes to gas contracts.null

As of January 27, Gazprom’s sales of natural gas to Europe and other countries were primarily settled in euros, at approximately 58 percent.

“An understandable and transparent procedure of making payments should be created for [all foreign buyers], including acquiring Russian roubles on our domestic currency market,” Putin said.

Coupon payment

Meanwhile, Russia appeared to have averted default on foreign debt by making a coupon payment on a sovereign eurobond, maturing in 2029, in US dollars. A bondholder said the payment had been received.

But Russian holders of domestic corporate eurobonds face delays in receiving payments settled through international agents, as transactions get snarled up by sanctions, Russia’s National Settlement Depository (NSD), companies and analysts said.null

Demand for rouble liquidity has declined as the central bank sold 0.8 trillion roubles ($7.7 billion) at a one-day “fine-tuning” repo auction on Wednesday, lower than in previous days.

“Demand at overnight repo auctions is falling fast,” Veles Capital brokerage said in a note, explaining that even though banks’ liquidity levels have fallen to their lowest since June last year, lenders are repaying previous repo debts to the central bank.

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