(Observer Network News) The power of Russia's "ruble settlement order" is emerging. After Russia announced its "gas outage" against Poland and Bulgaria on the 27th, the ruble exchange rate against the euro once reached 75.2 to 1, not only recovering all the lost ground since the special military operation on February 24, but also rising to the strongest since March 2020.
After falling to a record low of 154 rubles to 1 dollar in early March, the ruble counterattacked and came out of the "V" reversal, and by the close of the 27th, the ruble rose to 72.78 to 1 against the dollar and 75.2 to 1 against the euro.
Bloomberg quoted a person familiar with the matter as saying on the 27th that there are currently four European gas buyers who have settled their accounts with rubles, and ten European companies have opened ruble accounts. According to the British newspaper The Times, S&P global gas analyst Laurent Ruseckas pointed out that most EU energy buyers are "very likely" to eventually comply with the "ruble settlement order" proposed by russia. "Whatever they say is not paid in rubles, you can ignore it."
Just today, the Financial Times also broke the news under the headline "European Energy Group Prepares to Meet Putin's Ruble Settlement Requirements" that gas suppliers in Germany, Austria, Hungary and Slovakia have planned to open Russian bank accounts, including two of Europe's largest importers of Russian gas - German energy company "Uniper" and Austrian OMV Oil and Gas Group.
On the other hand, according to the Russian News Agency reported on the 28th, the Kherson region of Ukraine announced that the region will be converted to the ruble area from May 1.
Ruble to Euro Exchange Rate Figure from Sina Finance
As the deadline approached, Russia's "ruble settlement order" moved: Gazprom (Gazprom) announced that it would stop supplying gas to Poland and Bulgaria on April 27.
Under russia's "ruble settlement order", EU gas buyers must open two accounts in foreign currency and rubles at Gazprombank. The EU buyer pays in euros or dollars, which is then converted into rubles by the bank and transfers the ruble payment to Gazprom. The Russian side stressed that depositing euros or dollars into the account is no longer considered to be a performance of contractual obligations, and that Russia will only begin to implement the agreement after receiving rubles.
Bulgaria and Poland, on the other hand, were cut off by not using the mechanism when they received Gazprom's latest gas bills.
Russia's move has greatly increased pressure on countries that rely heavily on Russian gas, especially Germany and Austria. According to the Times, 40% of Germany's natural gas imports from Russia, and it will not be completely free of dependence on Russia until 2024 at the earliest. The Bundesbank estimates that if Moscow cuts off supply, the German economy will shrink by 5 percent, and inflation could rise another two percentage points from the 6 percent level.
Austria, on the other hand, gets 80 percent of its gas from Russia and can't get rid of its dependence on Russian gas until 2027. Austria is currently setting aside a €6.6 billion fund to replenish its reserves before the winter.
Katja Yafimava, a senior researcher at the Oxford University's Energy Institute, noted: "This sends a very clear signal that if there is no payment under the new procedure and no exemption (moscow) to continue using the old procedure, then you risk seeing your supply cuts." ”
Russia supplies natural gas to 23 European countries via pipelines. Pictured from Bloomberg
Under Russia's tough "ruble settlement order", the Times noted that most EU importers are "highly likely" to make concessions when their bills arrive in the coming weeks.
Laurent Ruseckas, a gas analyst at S&P Global, said the economic risks of a "gas outage" could lead many EU member states to follow Hungary's lead and move closer to Putin's demands.
"I think most EU counterparties are very likely to comply with it," Russekas said. "Whatever they say is not paid in rubles, you can ignore it."
The EU's attitude towards the ruble settlement order was initially tough and refused to accept it, calling on member states to "unite" to reject Moscow's demands. But in recent times, the EU's attitude has softened as the "toughest weapon" of the energy ban has been slow to roll out. The Financial Times pointed out on the 28th that with the approaching payment deadline in May, negotiations between the EU utilities sector and Gazprom are strengthening.
The European Commission issued documents on April 21 saying it was "seemingly possible" to pay for Russian gas under Russia's decree requiring energy bills in rubles. The EU's sanctions regime does not prohibit companies from opening accounts with Gazprombank or approaching the bank to try to find a solution, the opinion said. If the EU imports commercial euros or dollars to pay the bills, and then asks Gazprom's banks to exchange them for rubles, then eu sanctions can theoretically be circumvented and Russian demands can be met.
According to the Financial Times, gas suppliers in Germany, Austria, Hungary and Slovakia have planned to open Russian bank accounts. Bloomberg also reported on the 27th that a person closely related to Gazprom revealed that four European gas buyers have paid for the next settlement cycle in rubles in accordance with Russia's requirements, and ten European companies have opened ruble accounts in Russian banks to meet payment requirements.
Screenshot of the Financial Times report
According to Reuters and "Russia Today" (RT), Austrian Prime Minister Nehammer announced on the 27th that Austria has accepted the "ruble settlement order" launched by Russia in March and complied with the mechanism to open a ruble account.
"We, the Austrian Oil and Gas Group (OMV), accepted the Russian payment terms. The German government also accepted. Nehammer said at a news conference that the Russian side's request "to be found to be in compliance with the terms of EU sanctions is very important to us."
In addition, the Financial Times said that two of Europe's largest importers of Russian gas, the German energy company "Uniper" and the Austrian OMV oil and gas group, are planning to open accounts at Gazprombank. Italian energy giant Eni Group is also preparing to open a ruble account at Gazprom and is waiting for instructions from the Italian government and the European Union.
Before that, another EU country, Hungary, had made it clear that it would pay gas bills in rubles. Hungarian Prime Minister Orbán said on April 6 that for Hungary, there would be no problem with Russia's gas ruble settlement decree. "It won't give us any problems... If the Russians make a request, we will pay in rubles. ”
On the other hand, according to the Russian News Agency reported on the 28th, Kirillo Stremosov, vice chairman of the military and civilian government of the Kherson region of Ukraine and director of the Kherson Regional Committee for the Promotion of Peace and Order, announced that the Kherson region will be transferred to the Ruble district from May 1.
Streemusov said there would be a four-month transition period during which the Russian ruble and the Ukrainian hryvnia would circulate in the region. "Then we will switch entirely to rubles," Stremusov stressed.
"So far, unfortunately, we have seen That Russia respond well to the sanctions," said Polish Prime Minister Mateusz Morawiecki on the 27th when talking about the Russian gas supply cut. He added that Poland "will not succumb to this extortion" and that in order to "correct" the situation, Poland will continue to call on EU countries not to pay Russian gas in rubles, saying it would work to develop new sanctions.
Russian President Putin said to lawmakers on the 27th that the Russian ruble, the banking system, the transportation sector and the entire economy have withstood the sanctions, he said: "They use various excuses, sometimes even no excuses, step by step to introduce new restrictions." Putin said Moscow has successfully resisted sanctions, withstood the blow, and has not collapsed.
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