Why Russia demanded to transfer payments for gas into rubles
Russia has taken from euros and dollars to rubles in the calculation of gas supplies to buyers from unfriendly countries, Russian President Vladimir Putin announced. He explained this by saying that the Western currencies used to pay for Russian gas have “compromised” themselves. Putin made it clear that this was only the beginning (“let’s start with this”). Later, Deputy Prime Minister Alexander Novak also said that it had become unreliable to trade oil for dollars and euros, and in the near future it was necessary to switch to settlements in national currencies here as well.
How expenses are spent
Putin instructed Gazprom to track the change in the payment currency in his contracts with buyers from unfriendly countries.
This means that the announced transfer of settlements to rubles will affect only pipeline gas supplies – excluding sales of liquefied natural gas (LNG) by the same Gazprom, as well as NOVATEK.
Russia’s gas exports account for about 10-15% of the total hydrocarbon exports, that is, most of it is oil, and so far we are not talking about payments in rubles, ING economist Dmitry Dolgin notes. An economist at Raiffeisenbank, Stanislav Murashov, doubts whether to switch to ruble settlements for the operational management of gas.
It follows from the President’s statement that foreign buyers of Russian gas offer to freely sell their currency and receive rubles on the Russian domestic market to pay for gas (the Bank of Russia depends on a weekly order that determines the procedure for performing such operations). From the point of view of economic importance, with average average conversion values for gas in ruble equivalent to the established 100% standard for the sale of foreign exchange earnings from its exports, VTB Capital economist Alexander Isakov in the Telegram channel.
Since the end of February, Russian exporters have been demanding the sale of 80% of foreign exchange earnings on the domestic market.
For the economy, there is practically no difference between the fact that Gazprom receives foreign currency from gas exports or receives rubles that foreign counterparties from countries recognized as unfriendly buy for foreign currency on the Russian market, Sofya agrees with Renaissance Capital’s chief economist for Russia and the CIS Donets. Potentially insignificant does not prevent increasing the mandatory sale rate to 100%, thus ensuring full equivalence in terms of assessing foreign exchange earnings to the Russian domestic market, she says, therefore she does not consider it correct that the declared measure is directly related to the support of the ruble.
How will this affect the course
In any case, the difference between 80 and 100% is not as big and not as big as Dmitry Polevoy, Investment Director of Loko-Invest, believes.
Only on the news of a significant transition to the ruble in gas trading, the national currency strengthened, and it is clear that with a variable density, the decision should have a positive impact on the exchange rate, there will be no significant growth, the exchange rate will fluctuate around 100 ₽ per dollar, the investment strategic management company believes ” Arikapital” Sergey Suverov. As of 18:59 Moscow time on March 23, the dollar on the Moscow Exchange with settlements “for tomorrow” was trading at 97.74 ₽, having lost 5.67% to the closing review.
The role of the euro and the dollar in world trade is not growing, and Russia is unlikely to provide any benefits, according to former Central Bank Chairman Sergei Dubinin. “In the short term, this may temporarily strengthen the exchange rate, but in the long term, Gazprom’s foreign exchange offer will leave the exchange, which, on the contrary, will lead to a weakening of the ruble,” he suggests.
How much export earnings may be affected by the transition
Gazprom has never disclosed the details of gas contracts with foreign users, and even the calculations of contractual currencies were not advertised. The Bank of Russia pointed out at the beginning of 2021 that the share of settlements in US dollars for the export of Russian hydrocarbons is two-thirds, but in 2013-2019 the share of the euro in such settlements also grew. If we extrapolate these figures to the export of Russian gas only, we can conclude that Gazprom until recently sold gas to Europe for both dollars and euros.
Therefore, if the Europeans sell euros to the Russian stock exchange, pay for Russian gas, the domestic market may be more euros and less dollars compared to the current state of affairs.
The Austrian company OMV said on March 23 that its current contract with Gazprom provides for payment in euros. In addition, Gazprom Export has already sold gas to Western Europe for rubles through its Electronic Trading Platform (ETP), but in 2021 only 7.3 billion cubic meters were sold through this platform. m of gas, with a suspicion of October was not.
According to the Bank of Russia, in 2021 Gazprom sold pipeline gas abroad for $54.2 billion. Of these, countries not recognized as unfriendly (mainly Turkey, Belarus, China) received approximately $11 billion, respectively, the volume export earnings from the sale of gas in unfriendly countries can be estimated at an amount equivalent to about 43 billion US dollars (about 80%), follows from RBC’s calculations based on the FCS database.
According to Polevoi, the countries recognized as unfriendly in 2021 accounted for more than 70% of the comparison of monetary indicators.
According to statistics from the energy agency, 155 billion cubic meters were used in 2021. m of Russian gas, which is 45% of European gas imports and about 40% of gas consumption. The value of EU gas imports from Russia in 2022 ranges from 200 million euros to 800 million euros per day, Reuters notes.
Can it internationalize the ruble
In general, Europe receives a large number of rubles for the supply of its goods to Russia. As follows from the statistics of the Central Bank, for the months of 2021, 27% of all transfers from Russia to the EU for the import of European goods and services were in rubles. If foreign importers of Russian gas need rubles to pay, then foreigners will be more likely to receive rubles for their exports to Russia, the sum of the combined “spillovers in Russia.” as a hypothetical formation of the European interbank market in rubles,” says Donets.
In the norm of the national situation for such internationalization are the low volatility of the currency, the availability of high financial instruments derived from its exchange rate, the willingness of non-residents to participate in the market of financial assets of this country
That it will be transferred to Gazprom
For Gazprom, this will not be sent to the queue to receive foreign exchange earnings, since only unfriendly countries are allowed to trade foreign gas, NES finance professor Oleg Shibanov in the Telegram channel. However, it is not known in what area China sold the gas monopoly. Nevertheless, to buy equipment, if necessary, Gazprom can probably have great opportunities without operations in the foreign exchange market;
Despite the Ukrainian conflict and Western sanctions against Russia, Russian gas pipeline deliveries to Europe in 2022 are going smoothly in Europe, S&P Global Platts.
However, on the rise in oil, based solely on reports from the Western industry media, one can see that physical exports of oil are being spent, there is a delay in payments, the result of the rise of oil with a decrease in the price of oil (according to Platts, a Litasco trader this week used a batch of Russian Urals oil). at a discount of $31 per barrel to dated Brent). This is due to the need for impact, increased banking compliance and uncertainty around the ongoing development of the situation with sanctions.
On March 8, the United States began to import an embargo on Russian oil and gas, but at that moment it did not prohibit buyers from third countries from purchasing Russian energy carriers, and also did not prohibit such buyers from paying for them in dollars (except in cases where the persons involved in the transaction were seized) under blocking US sanctions).
Can the pricing mechanism for Russian gas change?
Judging by the president’s statement, the pricing mechanism for Russian gas belongs to the former ones, says Igor Galaktionov, an expert on the financial market at BCS Mir Investments. Last year, Gazprom reported that 80% of the underlying shares in the European oil market with delivery from one to 12 months, and the rest are contracts linked to oil prices.
“In theory, nothing changes: the price of gas is still according to the same formula that is laid down in the contract, with reference, as a rule, to spot markets. That is, in dollars, in euros, how much gas cost, how much it will cost – the factor that can now start to panic on the stock exchange, because it is not clear whether the Europeans agree or not, ”Igor Yushkov, an expert at the Financial University, told RBC.
According to Yushkov, settlements with Ukraine for transit were made in dollars, Gazprom pays a fixed rate in dollars. If a political decision is made and these payments are in rubles, then it will be in rubles, an expert is made. With Belarus, formally, their section of the gas pipeline belongs to a subsidiary of Gazprom, which he also paid in dollars, he used.
What other versions are there
While the US effectively banned Iran from selling its oil abroad through election campaigns against such buyers, a compromise option was chosen: countries such as India or South Korea deposited payments in their currencies due to Iran in separate accounts, media information. which could be written off only for the import to Iran of goods from these countries. Thus, in fact, commodity barter is perceived, and Iran does not get access to the currency.
It is possible that Russia’s move is also aimed at increasing the risks from a possible such scheme (foreigners must sell currency on the Russian market), admitted Elina Rybakova, chief economist at the Institute of International Finance (IIF).