In a surprise announcement that left bankers and politicians in the U.S. and Europe stunned and sputtering in protest, Russian President Vladimir Putin announced at a Russian cabinet meeting today that “unfriendly states” – those that have launched the sanctions against Russia – will have to pay for their imports of Russian natural gas in rubles only. According to TASS, Putin said: “I made the decision to implement within the shortest possible time the package of measures to transfer payments — we will start with that — for our natural gas supplied to the so-called ‘unfriendly’ states to Russian rubles.”
He added that Russia will otherwise maintain its existing contracts: “I would like to stress separately that Russia will definitely continue supplying natural gas in accordance with volumes and prices, pricing principles set in earlier concluded contracts.… I ask the government to give an appropriate directive to Gazprom on making changes to effective contracts. At the same time, all foreign consumers must be provided with the opportunity to perform required transactions.”
Even leaving aside the broader strategic implications of shifting out of dollars to a new international financial system, this Russian move will have a very interesting immediate effect: European purchasers of Russian natural gas are now going to have to avail themselves of lots of rubles, which should have an amusing impact on the dollar-ruble exchange rate.
