Putin's ruble ploy confirms that energy exports are his lifeline

[Nevilledog]

Link to tweet

https://www.atlanticcouncil.org/blogs/new-atlanticist/putins-ruble-ploy-confirms-that-energy-exports-are-his-lifeline/


The West’s unprecedented sanctions against Moscow over its invasion of Ukraine are expected to shrink the Russian economy by up to 15 percent this year. However, the Kremlin’s response so far suggests that Russia still has tools at its disposal to help it defend against a total economic meltdown, unless its energy export revenue tap is turned off.

Consider what has happened so far: Western sanctions have frozen more than half of the Central Bank of Russia’s (CBR’s) reserves. The CBR has had to enforce capital controls and mandate the conversion of 80 percent of export revenue into rubles, but this has so far allowed it to supply banks with sufficient liquidity to meet their liabilities.

Then last week, the Kremlin announced that “unfriendly”—meaning sanctions-wielding—countries will now be required to settle energy exports in rubles. Markets rightly judged that the move increases demand for spare rubles, and the Russian currency has already recovered some of the value it has lost in recent months. Over the coming weeks, Russia will now ensure that all 100 percent of export revenue is forcibly converted into rubles. Ruble payments can only feasibly be made in Russia, so the decision also makes it harder for exporters to avoid this conversion by accepting payments into escrow accounts held abroad.

There is an irony to the new policy which Russian President Vladimir Putin will enjoy. Western companies must now go to the Moscow exchange or the CBR—the very institution that has been sanctioned—and hope that it will accept their money. Clearly, Russia needs this income and won’t turn them away, but in the mind games that powers play against each other, turning the tables even symbolically is something.

*snip*

[uponit7771]

1. K&R, I pray the west can stick in there with Germany and their dumb decision to go all in ...

... on Russian gas with no quick backup or months long reserves.

Jus damn Germany

If we can get them the NG it helps EVERYONE out

[gab13by13]

2. 60% of Russia's exports are oil and gas.

[ProfessorGAC]

5. And That Is 20% of GDP!

Net exports are 32.7% of GDP.
That requires very low "C" & "GS" values in an economy under $1.5 trillion.
That's a lot of eggs in one basket.

[2naSalit]

3. K&R

[C_U_L8R]

4. Not if Ukraine blows it all up.

Seems there's a soft underbelly to this murderous beast.

[ProfessorGAC]

6. This Is Stupid

They can't survive without those energy sales. If buyers refuse to pay rubles, they can't cut off sales because of Russia's desperate economic need to sell those energy products. Any threat to withhold sales unless paid in rubles is an empty threat.
It's called a tool in Putin's toolbox, but I see it as a screwdriver for someone quarrying rock. Still a tool, but not very useful.