VIEW / Russia strikes Europe with an economic counterattack :: Economics
Russia has seriously upped the ante by announcing its own economic response to the West’s challenge. An ultimatum was delivered to switch to rubles in case of gas. Now the Central Bank of Russia has restricted the movement of funds by $300 billion to unfriendly countries. How can the West respond to this?
On Friday, the Central Bank of the Russian Federation limited the movement of funds by $300 billion in unfriendly countries. The West has frozen Russian reserves. The regulator recalled that earlier, in response to the blocking of foreign currency accounts, the Russian authorities had already banned foreigners from selling securities and withdrawing funds from the Russian financial system. And this, by the way, saved the Russian stock and debt market from collapse.
But the Central Bank went further. Now we are talking about the fact that “debt payments on the corporate debt of Russian companies and public debt to debt holders from countries that require approval against Russia will take place only with the decision of the government commission,” the Central Bank of the Russian Federation noted.
“Russia does not renounce its obligations, but in particular the dependence on sanctions, it takes control of any external payments in such currencies,” explains Vladimir Evstifeev, head of the analytical department of Zenit Bank.
“The introduced counter-sanctions do not make it possible to redeem income and redeem bonds in foreign currency. Use an overseas bank that must obtain approval for the transaction from regulatory sanctioning agencies. If permission is not granted, it means that Becomes a technical default. If then within 30 days it is not possible to pay the payment, then the funds on the bonds will default,” said Vladislav Antonov, a financial analyst at BitRiver.
Technical defaults on public companies are already underway as banks refuse to make payments to the guards. “These are protective measures, because the company can use them as force majeure”,
– says Yaroslav Kabakov, Strategy Director at Finam Investment Company.
In essence, this means that Russia itself is going into default, although the money is ready to pay all debts. Earlier, the West did not allow Russia to default on obligations and hold a court session in foreign currency, even despite the freezing of reserves. A default on obligations can represent a chain of significant losses in both the main investment funds and investment funds, such as investment packages of cargoes on death penalty credit default swaps, the arrest of Western Kabakov’s refusal to default. However, now to whom the Central Bank will decide itself – you can take on debts (those who elect against Russia have not introduced it), to whom – you can’t (unfriendly countries and companies).
Russia is not afraid of a default and is calmly going for it, because the economy will not notice it much in the face of a sharp increase in sanctions pressure. “Since 1998, even a meeting is not worth it. Then the default was caused by the collapse of the ruble and the historical crisis. It is caused by the USA and the EU through sanctions and freezing of the gold reserves of the Bank of Russia. Everything has already happened. The ruble fell against the dollar in the foreign exchange market by 100%. Prices have risen sharply. The standard of living will fall. Although the West has Russia’s gold reserves to eliminate the debts of everyone,” Antonov said.
“The key difference between the situation is that Russian investors will not suffer in this case, potentially affecting non-residents. The default is to take, first of all, reputational risks, the basis for the formation of a positive investment image of Russia after the end of the crisis period,” Evstifeev said.
The volume of Russia’s external debt, including non-state borrowings, is $478 billion. Until the end of this year, payments on the surface amount to about $60 billion in debt, including interest payments. According to Yevstifeev, $300 billion is the approximate amount of detected cases of infection for three years. In other words, Russia can decide on a minimum amount of three years at the expense of unfriendly countries.
Russia’s retaliatory countermeasure in the gas sector to transfer settlements to rubles discouraged Europe. The transition to rubles in payments for Russian gas is an attempt to enter into European sanctions, the statement of the head of the European Commission Ursula von der Leyen.
“Rubles can be purchased either on the foreign exchange market, or from the Bank of Russia for the sold currency or hypothetical gold. But gold has been added to us, perhaps, at present, it may not be necessary in the announcement of a sanctions regime for its buyers from Russia by the United States,” says Valery Mironov, Deputy Director of the Institute for Development Center of the National Research University Higher School of Economics.
The way out for the Europeans would be a withdrawn withdrawal from the Central Bank of the Russian Federation, then it was possible to buy rubles from one person – the Central Bank. But while Brussels is clearly not in the mood. Therefore, rubles, perhaps, buy cars on the stock exchange from different sellers. But here, too, everything will develop: in the near future, in order to understand what things can be worked with, and with some dangerous ones due to the risk of secondary phenomena.
“Russia set the task of unfriendly countries. Whoever solves it will provide gas. Importers have the task of bringing currency to Russia and for a commission for converting into rubles. “And for a will, you need permission from the department of the currency that was introduced into the treasury,” prisoner Antonov.
“One of the goals of Russia’s gas ultimatum is to establish the European possibilities of existence in the conditions of the possibility of acceptance. “The commercial company began to put pressure on the European political elites with the election of an award with Russia, which greatly interfere,” says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund.
According to him, Russia has now handed over the pass to Europe and is waiting for its decision. Four days after four days of accounting for Gazprom consumers in Russia from unfriendly countries, the addition of gas to the contract with a change in currency is calculated without the ability to change the pricing formula. Estonia has already stated that in response to Russia’s conditions, it is necessary to put up its own – change the price (ask for a discount) and the volume of purchases.
The EU is now required to develop a single suspicion on this issue. Modern European politicians are mainly opposed to paying for gas in rubles, because it is politically difficult for them to agree to Russia’s ultimatum offer.
The EU receives 155 billion cubic meters of gas from Russia, which is 35% of all imports. Much higher in countries with a high proportion. Thus, in Austria, Germany, Latvia, Poland and some other countries, Russia is a gas supplier with a share of 64-72%. Italy, France, Turkey and the Czech Republic receive less than 50% of their imported gas from Russia. Switzerland and Denmark – less than 10%. Spain, Portugal, Ireland and Belgium do without Russian gas.
“The price of the question for many countries is too high: to refuse electricity and heating or not. If the EU refuses to buy Russian gas for rubles, then Moscow will most likely cut off Europeans not only from gas, but also from coal. Moreover, Europe will not only lose one major enterprise, but the entire volume of investment in gas will take an incredibly expensive place. There will be a sharp global deficit and a global energy crisis,” Yushkov explains.
If the unanimous council of the EU is not accepted, then the transition to rubles will not be prohibited. “I think that European politicians decide this issue themselves, this is their business, and companies will agree to switch to rubles for economic reasons. Politicians, on the other hand, turned it around in such a way that Russia highly appreciated it tactically, but effectively showed it, because Europe will still refuse Russian hydrocarbons. But in the future,” Yushkov said.
The German Ministry of Economy has already stated that it considers the issue of settlements for gas supplies to Russia and oil in order to attract investment and search for contracts, and there is no interference from the department. This statement was made by the representative of the Ministry Robert Zeverin.
Another decision of the president was announced by Judge Emmanuel Macron at the end of the EU summit on Friday. According to the European Commission, a total energy purchase for the entire device will be provided. “We have given the European Commission the power to regulate various instruments in the energy market, especially with regard to the price limit (for gas). For the first time, it was decided that the European Commission promises to make general purchases of energy,” Macron said.
To all appearances, we are talking about creating a single gas purchaser, which is not the first time Europe has been talking about it. “The creation of a single gas buyer with the destruction of the entire capacity of the system,” says Yushkov. it was about the fact that, as a result, the buyer will dictate prices to all suppliers. However, this focus, according to the expert, will not work with LNG suppliers: as soon as the Europeans with someone who will voluntarily take $500, not $1,000, the LNG will go to Asia, where they will pay $1,000.
“But the EU, that their future buyer can dictate terms to Gazprom,” says Yushkov. However, will Russia agree to this? According to the expert, the position of the Moscow stand and does not intend to retreat.