RUSSIA's NEW SCHEME OF PAYMENT "GAS FOR RUBLES"
After having discussed with a Russian friend, I've figured out how Russia's new payment scheme will work, at least with European partners.
It appears to be less ambitious than what was announced by Putin.
Authorized credit organizations will open bank accounts of type “K” in rubles and foreign currency for foreign buyers at their request.
Funds in foreign currency under contracts for the supply of natural gas are credited to a type "K" bank account in this currency. For the sale of foreign currency, the funds of a foreign buyer, on his behalf, are debited from his type “K” account in foreign currency.
The conversion takes place and following the results of the conversion, funds in rubles are credited to a bank account of type “K” » in rubles. Most noteworthy, the conversion WILL NOT BE AUTOMATIC!
Further, if effectively converted, the payment in rubles is sent to Gazprom and ONLY THEN, the supply contract is considered fulfilled.
A few comments :
The Germans transfer euros to their account at the Gazprombank (GPB) - GPB sells them on the MICEX ! Who buys euros for rubles on the MICEX? Importers of European goods in Russia
Thus euros for gas will be absorbed into the accounts of non-sanctioned banks and a bunch of importers. They can only be banned by banning all euro trading with Russia.
Let's say no one sells anything to Russian importers in euros. They do not need euros, GPB cannot sell them on the stock exchange, the Germans cannot pay for gas, gas supplies are cut off.
In order to still buy gas, the Germans still have to offer something for sale in the Russian Federation. If we do not take an extreme case, then the system puts pressure on Europe, forcing it to be interested in selling goods to the Russian Federation.
This could lead to a partial lift of the current sanctions that have been slapped on Russia, in order to facilitate the sales of European goods into Russia and sustain a certain demand for euros there.
Nowhere in the Decree are there any obligations to provide rubles at the exchange rate. And even more so - there is no "automatic conversion". This scheme works absolutely in all banks, anywhere in the world with all reserve currencies.
For example, a company has a dollar account and a yen account. There is nothing on the yen account. And the company wants to buy something from Japan, she instructs the bank to buy yen for dollars on the exchange market.
How Germany will dispose of its rubles is none of RUSSIA's business. The main thing is that Russia will sell for rubles. The difference is that the EU will finally have a ruble account, which is not the case now.
So in the end, let the EU mine these rubles ! They will be counted in euros, and paid in rubles. And it's a way that doesn't need to re- negotiate the contracts in rubles, because they have already been concluded.
The main benefits I see in short-term period are :
- Russia can re-build a trade account surplus in rubles that will be immune to any European theft
- it will goad European countries to gradually lift the sanctions in order to sell goods on the Russian market
Nonetheless, this is far less ambitious than what I had first understood. This could also be a first step that doesn't preclude further more escalatory steps toward full payment in rubles. It remains to be seen.
In conclusion, I still think that Russia is missing a window of opportunity that there is only once in a century. Given the current structural economic weaknesses of the European Union, Russia could bring the EU to its knees. That will likely not be the case in 5y or so.