Putin’s shrewdness when he obliged to pay for Russian gas using rubles

KOMPAS.com – President Russia Vladimir Putin request payment gas in currency rubel purchased by hostile countries from April 2022, as a result of the military conflict in Ukraine.

The hostile countries that Putin is referring to are those that showered Russia with a series of sanctions for its military invasion of Ukraine.

It is known, these countries are the US and its allies, countries in the European Union. The European Union itself is a customer of Russia’s liquefied natural gas.

Putin also threatened that if the hostile countries refused to pay in rubles, Russia would stop the gas flow.

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According to the decree, all payments will be handled by Russia’s Gazprombank, a subsidiary of state-owned energy giant Gazprom.

The buyer will transfer the payment to the Gazprombank account in a foreign currency, which will then be converted by the bank into rubles and transferred to the buyer’s ruble account.

So how effective is Putin’s policy of forcing hostile countries to use the ruble in purchasing Russian gas?

Putin’s ingenuity

Quoted from the page The WireRussia’s military attack on Ukraine seems to have been prepared for a long time by Putin and his aides, including various well-thought-out plans in the face of a series of economic sanctions.

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Despite some of his less-than-perfect plans for Ukraine, Putin was not reckless. He himself has long been known as a leader who is smart and thinks rationally.

As is well known, White deliberately converted the Russian ruble to the price of gold. By pegging 5,000 rubles for every 1 gram of gold, this policy is sure to get the US and its allies in trouble.

On the other hand, the US and a number of Western countries have decided to stop exports to Russia as part of the sanctions.

It is impossible for Western countries to get enough rubles. They cannot earn rubles by exporting to Russia. On the other hand, Western countries need Russian oil and gas.

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This means that inevitably, by necessity, the only way for these countries to get gas and oil is to pay rubles by selling gold reserves in exchange for rubles, which means having to send blocks of gold to Russia.

Putin realized that there was no point in accepting dollars for the sale of Russian gas. Considering that Russia’s foreign exchange reserves in the form of dollars cannot be used because access to finance in the world has been blocked by the US and its allies, including sanctions prohibiting Russian banks from using SWIFT transactions.

As the saying goes, once rowing two islands, Putin gains two advantages at once by forcing the use of the ruble, namely Russia’s soaring gold reserves and a strengthening ruble.

Putin’s desire to leave the dollar widely in world trade transactions can be realized now.

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The risk of the collapse of the US dollar

Putin is aware that the United States is the country that likes to print paper money the most compared to other countries. US Dollars are just paper printed without any guarantee at will by the US government.

The US dollar printed by the Fed has increased by 800 billion US dollars since 2008 to almost 8.5 trillion US dollars in 2021. Inflation is getting out of control.

A tenfold increase in currency printing would not have been possible had the dollar been backed by the Fed’s gold. The Fed’s gold reserves are much smaller than the number of dollars circulating in the world.

While the US is reeling from the sheer number of dollars it has minted itself, Putin has an opportune time to retaliate by reviving transactions with gold or other non-dollar payments as a medium of exchange.

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This was a smart move by Putin because gold also has a natural resonance with India and China, the biggest gold importers in recent decades. Gold is the most accepted means of payment worldwide, even when compared to the US dollar.

Gold owned by Indian households is estimated at 40 percent of GDP. Culturally and psychologically, gold has great appeal in India, China, and Russia.

Russia has more than 50 percent of its foreign exchange reserves in gold. Making it can still last a very long time despite facing economic sanctions from the US and its allies.

If Putin’s idea of ​​leaving the US dollar continues even after the crisis in Ukraine is over, and then followed by other countries, then it will certainly be a nightmare for Uncle Sam’s country.

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As a result, many countries may no longer accumulate dollars in their foreign exchange reserves. The US dollar will return to its home country, make the dollar stock abundant in the country, and make inflation go crazy in the US.

Moreover, China, which is the world’s economic giant today, has often campaigned to leave the US dollar as the regional currency.

Russia’s war on Ukraine and Putin’s policies could be a turning point for a radical change in the use of the dollar, this also makes the US very careful in responding to the Russian threat.

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