Play "combination boxing"! Russia started a "financial counterattack", and Europe was anxious.
[Global Times correspondent in Russia Sui Xin Global Times correspondent in Germany Aoki Liu Yupeng] Faced with the economic sanctions imposed by "unfriendly countries" step by step, Russia recently launched a series of "combination boxing" to settle natural gas with rubles, limit domestic capital outflow, and anchor rubles with gold. While further stabilizing the domestic financial market and the trend of rubles, it also opened the prelude to the economic counterattack against the United States and the West.
Impact on the dollar financial system
The Kremlin Information Office said on March 28 that Russian President Vladimir Putin instructed the government, the central bank and Gazprom to take measures before March 31 to change natural gas transactions with "unfriendly countries" into rubles. "Western countries have declared an economic war by freezing Russian assets, so Russia believes that it is no longer necessary to accept dollars or euros to pay for Russian exports." Reuters said on the 28th that Putin stressed that Russia would refuse to use all currencies with "damaged reputation" in natural gas settlement, and the Russian government and central bank should study the corresponding mechanism within one week to enable foreign buyers to buy rubles in the Russian domestic market.
Russia’s "Viewpoint" reported on the 28th that this new settlement method outside the US dollar and the euro indicates that the global pattern is changing. Vasily Koltashov, a Russian economist, believes that the Russian ruble has been depreciating every day recently under western sanctions. After Russia announced the sale of natural gas according to the new rules, the ruble quickly strengthened due to market sentiment. "When we talk about the ruble trade, it will not only involve natural gas, but also oil and metal raw materials. After a period of time, some goods sold in western exchanges will also be sold in rubles. In the future, Eurasia may form a new unified market, and the ruble, RMB, Indian Rupee and Iranian rial will play an important role. "
According to the BBC, 40% of the EU’s natural gas, 27% of its oil and 46% of its coal are imported from Russia. In natural gas alone, the EU has to pay 200 million to 800 million euros to Russia every day this year. Emmanuel Le Roy, director of the Institute of Russian-French History in France, said that linking natural gas payment to the ruble will strengthen the Russian currency and shake the leading position of the US dollar and the euro, because the current global bulk energy sales are either linked to the US dollar or the euro. Some countries have imposed severe sanctions on Russia, actually tearing up the current global financial system based on the dollar.
Europe is in a hurry.
German Economic Weekly believes that when European importers have to pay for natural gas in rubles instead of euros or dollars, this demand will support the ruble. Ullrich Nieyer, an economist at the University of Dü sseldorf, said that Europe must hoard rubles to ensure energy imports, or get rubles from Russian commercial banks, which can help Russia stabilize its foreign exchange reserves. Russia is using its foreign exchange reserves to buy important commodities such as chips or medicines from countries that have not yet imposed sanctions.
However, DPA said that many EU leaders have stated that they have ruled out the possibility of using rubles to pay for energy supply. Germany and Italy, the most important importers of Russian gas, said that Russia’s move violated long-term supply contracts. According to German Chancellor Scholz, the existing contract stipulates the currency of payment. Gazprom has signed agreements with more than 40 European companies. Moreover, it is not easy for European companies to obtain rubles, and western central banks are unlikely to provide much help.
On the 28th, Reuters quoted a researcher from Oxford Energy Research Institute as saying: "For most European buyers, it is very difficult to pay for natural gas orders with rubles, and certainly not in a short time." German media believe that European companies may stick to the original payment method and observe the subsequent development. Some European companies believe that if Gazprom unilaterally adjusts the contract, it will constitute a breach of contract, and the contracting parties can choose to go to the arbitration tribunal.
Keep an eye on gold
The Russian channel of the US Forbes website reported on the 26th that after a two-week "rest", the Russian central bank will resume buying gold from banks on March 28th. The transaction will be conducted at a fixed price of 5000 rubles per gram. Gazprom executives said that according to the current gold price, this corresponds to the exchange rate of 80 rubles for every dollar, while the market exchange rate on the 28th was 102 rubles for every dollar. Not long ago, Putin signed a law to cancel the value-added tax (20%) on the purchase of gold bars for investment purposes, and the Russian central bank also allowed Russians to buy foreign currency gold bars in cash. Banks surveyed by Forbes said that the demand for gold purchase has increased tenfold since the abolition of VAT.
Some analysts believe that there are two main purposes for the Russian central bank to buy gold at a "price": one is to improve the liquidity of Russian banks kicked out of the SWIFT system by buying gold, and the other is to accelerate dollarization by concentrating more gold.
Earlier, the US Treasury Department said that Americans were prohibited from engaging in any transactions involving the Russian Central Bank, the Russian National Wealth Fund or the Russian Ministry of Finance. This provision will "effectively" prohibit individuals (including gold dealers, distributors, wholesalers, buyers and financial institutions) from buying, selling or promoting gold transactions involving Russia and sanctioned parties. Al Jazeera said that the U.S. move is aimed at imposing secondary sanctions on those who conduct gold transactions with Russia. According to the information released by Russian Central Bank official website on 25th, all the existing gold reserves in Russia are in Russia. As of February 1st this year, the total value of Russian gold reserves is about 132.2 billion US dollars.
According to today’s Russian TV station reported on the 25th, the Russian central bank recently said in a statement that Russia has taken corresponding measures to limit the flow of 300 billion US dollars of funds to "unfriendly countries" due to the freezing of some Russian gold and foreign exchange reserves by the west. The Russian government has banned foreign investors from selling securities and withdrawing funds from the Russian financial system. In addition, the corporate debt and public debt of Russian companies can only be paid to the debt holders of countries that support sanctions against Russia with the permission of government committees.
Alexander Razuvayev, a Russian financial analyst, said that under the current circumstances, foreign investors will not be able to withdraw funds from Russian overseas assets and projects, which will have a positive impact on the economy of the whole country. This situation has reduced the pressure on the ruble, thus supporting the national currency. Some analysts said that although the West froze Russia’s foreign exchange reserves, it did not want Russia to fall into a large-scale default due to its inability to pay its foreign debts, and recently let Russia complete the payment in foreign currency. The main reason is that the default of Russian foreign debt may bring a series of heavy losses to large western financial and investment institutions.
On March 28th, Moscow Stock Exchange resumed all Russian stock trading, and the trading time was from 10: 00 to 14: 00 Moscow time. On the same day, after the opening of the Russian stock market, due to the deterioration of the external commodity situation and the pressure of western sanctions, the MOEX index and RTS index of Russia fell within one minute of opening, and the share price of Russian fertilizer producer PhosAgro rose against the trend. MOEX index fell 0.5%, RTS index fell 1.2%.