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G7 rejects Russia's demand to pay for gas in rubles

Rogue Valley

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G7 rejects Russia's demand to pay for gas in rubles

iu

3.28.22
The Group of Seven major economies have agreed to reject Moscow’s demand to pay for Russian natural gas exports in rubles, the German energy minister said Monday. Robert Habeck told reporters that “all G-7 ministers agreed completely that this (would be) a one-sided and clear breach of the existing contracts.” He said officials from France, Germany, Italy, Japan, the United States, the United Kingdom and Canada met Friday to coordinate their position and that European Union representatives also were present. Habeck said that “payment in ruble is not acceptable and we will urge the companies affected not to follow (Russian President Vladimir) Putin’s demand.” Putin announced last week that Russia will demand “unfriendly" countries pay for natural gas only in Russian currency from now on. He instructed the country’s central bank to work out a procedure for natural gas buyers to acquire rubles in Russia.

Economists said the move appeared designed to try to support the ruble, which has collapsed against other currencies since Putin invaded Ukraine on Feb. 24 and Western countries responded with far-reaching sanctions against Moscow. But some analysts expressed doubt that it would work. Asked by reporters earlier Monday if Russia could cut natural gas supplies to European customers if they reject the demand to pay in rubles, Kremlin spokesman Dmitry Peskov said in a conference call that “we clearly aren’t going to supply gas for free.” “In our situation, it’s hardly possible and feasible to engage in charity for Europe,” Peskov said. Asked what happens if Russia turns off the taps now, Germany’s energy minister said, “We are prepared for all scenarios.” “Putin’s demand to convert the contracts to ruble (means) he is standing with his back to the wall in that regard, otherwise he wouldn’t have made that demand,” Habeck said, adding that Russia needs rubles to finance its war at home, such as payments to troops.


Well done. Refuse to acquiesse to Moscow's extortion demands.
 
So...what will Europe do if Putin shuts off the gas and oil? According to what you quoted from the article, Europe says they are prepared. What does that mean? Will they be looking to buy from the US?

I guess we'll just have to wait and see what happens, eh?

Lol. Why ask me such questions? I'm not a G7 Minister and neither are you.
 
Lol. Why ask me such questions? I'm not a G7 Minister and neither are you.
Oh. Sorry. I thought you might have read the entire article and it might have said what they would do.
 
Oh. Sorry. I thought you might have read the entire article and it might have said what they would do.
So, you didn’t read the article. Link was provided. You could have read it yourself and still asked the rhetorical question.

Interesting that you made a comment without reading the article and posited a question…
 
So...what will Europe do if Putin shuts off the gas and oil? According to what you quoted from the article, Europe says they are prepared. What does that mean? Will they be looking to buy from the US?

I guess we'll just have to wait and see what happens, eh?
European leaders are going to the Arab world alot recently begging, so that's the plan.
 
So, you didn’t read the article. Link was provided. You could have read it yourself and still asked the rhetorical question.
The only comment I made was that we'll have to wait and see what happens.

None of my questions were rhetorical. I asked them with all seriousness.

And no. I didn't read the article. Instead, I asked the person who I assumed read the article: The OP.
 
European leaders are going to the Arab world alot recently begging, so that's the plan.
Oh yeah. I forgot about that. Even our own President has gone to them begging.
 
The only comment I made was that we'll have to wait and see what happens.

None of my questions were rhetorical. I asked them with all seriousness.

And no. I didn't read the article. Instead, I asked the person who I assumed read the article: The OP.



Your questions were basic and to the point. Germany's Olaf did point out much earlier over sanctions that sanctions have to be say scientific; well thought out, and designed to maximise pain on Russia, while minimising pain on EU; and most important: must not endanger Germany's energy security.

Instead a hysteria threw all reason and common sense out of the window. There were calls for booting Russia off SWIFT. Cooler heads asked: if you boot Russia off payment systems, how do you plan on paying Russians for their gas?

Why boot Russia off Euro/Dollars only to insist on Russia transacting in same currency?
 
European leaders are going to the Arab world alot recently begging, so that's the plan.

The OPEC nations are probably not going to boost production that much. I have a bad feeling that energy prices, which are already high, are going to get astronomically high soon. Russia is looking for some way to put NATO and the Western world back on its heels and it might be able to weaponize its natural resources. Putin didn't want to go there as long as Europe was willing to buy the oil, but Russia's economy is cratering. Russia has some money in reserve - it's willing to service its debt but it can't because Western governments are blocking the transactions, and even when they're not, Western banks are afraid of getting massive fines for taking a payment in potential violation of national sanctions laws.

Russia's basically getting their credit frozen. And with the US offering to boost production and with Europe looking ahead to ween itself off Russian energy, there's only a finite amount of time that Russia can maximally weaponize what few weapons it has. So I wouldn't be surprised if Russia starts delaying energy shipments. There's a very real risk of a global economic shock right now.

ETA: Sorry, wanted to add that if Russia does keep oil from Europe, OPEC might be wise to increase production to prevent demand destruction (i.e. prices going so high that everyone changes their habits). The last time oil surged so rapidly back in 2008, it precipitated (though did not cause) the Great Recession. Within 6 months, gas prices went from nearly $4.50 per gallon in some places to 2.50. It also led to a lot more US shale production, which is something the OPEC countries would rather not see again.
 
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What may seem a minor issue to the hurried onlooker is nevertheless of great significance. Namely that in most cases it isn't the governments of whatever countries have agreed with however many others, that have a contract with the Kremlin, but it's the energy companies of said countries that have contracts with exporting companies in Russia.

Now in Russia the leading thug can twist the arm of any company, over at our end that is not so easy.

So Western energy companies will have to comply with the political arrangement outlined above by the politicos, yet Habecks's statement of " ~............................... we will urge the companies affected not to follow (Russian President Vladimir) Putin’s demand” is rather telling.

Note what I've bolded.

IOW Habeck acknowledges that legal hurdles would prevent the government (German, in this case) from making it "an order".

Beyond all of which the much acclaimed European solidarity is already crumbling in that no agreement can/could be reached over placing an embargo on Russian gas. Austria, Hungary and Italy said no and Germany may not have said it outright, but it doesn't need to.

Alternative fuel supplies are not so readily available on the international market so as to be able to fill the "Russian gap" overnight. In fact it'll take Germany alone at least 2 years (possibly 3 or more) to build the necessary coast terminals to be able to take LNG from the US and Qatar.

Another interesting aspect of this fantastic solidarity is the relationship between the country I live in and its Northern neighbor France.

Spain does not rely on Russia at all, getting its energy largely from Algeria (certainly on the gas sector). And while it has terminals all along its vast coasts, East, South, West and North, it has run into French opposition for years in that France has dallied on financing its share of a pipeline that would pump LNG across the border and, especially in this situation of today, on to other European countries via France.

Basically on account of the lobbying of France's energy giant EDF, who didn't want their domestic nuclear supremacy threatened by competition via other fuels.

So we'll have to see how the people of the above "reluctant" countries will really react when winter comes again (as it will) and the gubmints appeal to them to wear more pullovers indoors. That's not even mentioning the industry of a giant like Germany having to shut down large shares of its production.

I predict that in the short and medium run we're going to see a load of rubles being bought, if Putin persists in this recent move. From the very Russian bank, of course, that has been placed on the naughty list.
 
Your questions were basic and to the point. Germany's Olaf did point out much earlier over sanctions that sanctions have to be say scientific; well thought out, and designed to maximise pain on Russia, while minimising pain on EU; and most important: must not endanger Germany's energy security.

Instead a hysteria threw all reason and common sense out of the window. There were calls for booting Russia off SWIFT. Cooler heads asked: if you boot Russia off payment systems, how do you plan on paying Russians for their gas?

Why boot Russia off Euro/Dollars only to insist on Russia transacting in same currency?
Another point to ponder: The G7 has no power to prevent the companies that buy gas and oil from Russia from paying in Rubles...unless, of course those countries ban all of their energy companies from doing business with Russia.
 
Another point to ponder: The G7 has no power to prevent the companies that buy gas and oil from Russia from paying in Rubles...unless, of course those countries ban all of their energy companies from doing business with Russia.

That's apparently a part of the problem, though. It's not just the sanctions themselves but it takes armies of lawyers to figure out what the sanctions mean for individual companies. No company in a G7 country is so desperate to do business with Russia right now that they risk getting fined into oblivion, and on top of that having their corporate image dragged through the mud for doing business with a war criminal.
 
That's apparently a part of the problem, though. It's not just the sanctions themselves but it takes armies of lawyers to figure out what the sanctions mean for individual companies. No company in a G7 country is so desperate to do business with Russia right now that they risk getting fined into oblivion, and on top of that having their corporate image dragged through the mud for doing business with a war criminal.
I hear that Shell and BP have voiced their rejection of the Ruble thing but governments of Germany, Austria, Hungary and Italy don't have leg to stand on, when trying to force their national energy importers from following suit.

Not, that is, while refusing to join into the general thrust for putting a total embargo on Russian fuel.
 
That's apparently a part of the problem, though. It's not just the sanctions themselves but it takes armies of lawyers to figure out what the sanctions mean for individual companies. No company in a G7 country is so desperate to do business with Russia right now that they risk getting fined into oblivion, and on top of that having their corporate image dragged through the mud for doing business with a war criminal.
Or they could just go out of business.
 
The thing is: Russia needs the money no matter what currency it is. They actually do need a foreign currency reserve to pay for their imports, so my guess is they will do nothing and it's all just empty words. Words are cheap.
 
Just heard/saw on the German news (I can get that down here via Satellite) that Putin has assured German Chancellor Scholz that European payments in Euros (€) will continue to find acceptance.

Knowing Putin that probably means they won't.:ROFLMAO:
 
Exactly what is EXTORTIONARY about wanting to be paid in roubles?
It's blackmail; 'pay us in Roubles or we shut off your gas'. There was no controversy or demand for payment in Roubles prior to the invasion of Ukraine. Putin is desperate.
 
The thing is: Russia needs the money no matter what currency it is. They actually do need a foreign currency reserve to pay for their imports, so my guess is they will do nothing and it's all just empty words. Words are cheap.


You are also missing the point. And your arguments dont make sense. The Dollar/EU world, as is their right, have taken the path to kick Russia out of that world. You say it is justified; fine; but what difference does that make? It is natural for Russia to look for different ways to do business that is not at the mercy of the Dollar/EU barons. Of course, Russia needs the business. And for the moment has to go along with existing contracts. But where Russia can, she is contracting in Roubles. India will be purchasing its oil from Russia in a Rouble/Rupee exchange.

Nor do I understand the Dollar/EU beef. Do they want to kick out Russia from the Dollar/EU systems or not? And if you kick Russia out of the system is the question of how to conduct future business not natural?
 
It's blackmail; 'pay us in Roubles or we shut off your gas'. There was no controversy or demand for payment in Roubles prior to the invasion of Ukraine. Putin is desperate.


Why cant Germans pay in Roubles?
 
What may seem a minor issue to the hurried onlooker is nevertheless of great significance. Namely that in most cases it isn't the governments of whatever countries have agreed with however many others, that have a contract with the Kremlin, but it's the energy companies of said countries that have contracts with exporting companies in Russia.

Now in Russia the leading thug can twist the arm of any company, over at our end that is not so easy.

So Western energy companies will have to comply with the political arrangement outlined above by the politicos, yet Habecks's statement of " ~............................... we will urge the companies affected not to follow (Russian President Vladimir) Putin’s demand” is rather telling.

Note what I've bolded.

IOW Habeck acknowledges that legal hurdles would prevent the government (German, in this case) from making it "an order".

Beyond all of which the much acclaimed European solidarity is already crumbling in that no agreement can/could be reached over placing an embargo on Russian gas. Austria, Hungary and Italy said no and Germany may not have said it outright, but it doesn't need to.

Alternative fuel supplies are not so readily available on the international market so as to be able to fill the "Russian gap" overnight. In fact it'll take Germany alone at least 2 years (possibly 3 or more) to build the necessary coast terminals to be able to take LNG from the US and Qatar.

Another interesting aspect of this fantastic solidarity is the relationship between the country I live in and its Northern neighbor France.

Spain does not rely on Russia at all, getting its energy largely from Algeria (certainly on the gas sector). And while it has terminals all along its vast coasts, East, South, West and North, it has run into French opposition for years in that France has dallied on financing its share of a pipeline that would pump LNG across the border and, especially in this situation of today, on to other European countries via France.

Basically on account of the lobbying of France's energy giant EDF, who didn't want their domestic nuclear supremacy threatened by competition via other fuels.

So we'll have to see how the people of the above "reluctant" countries will really react when winter comes again (as it will) and the gubmints appeal to them to wear more pullovers indoors. That's not even mentioning the industry of a giant like Germany having to shut down large shares of its production.

I predict that in the short and medium run we're going to see a load of rubles being bought, if Putin persists in this recent move. From the very Russian bank, of course, that has been placed on the naughty list.


Well, thanks for some valuable insights into the gas world. :)
 
Fair enough, but how is paying in Roubles blackmail?

No idea. But they're not going to do it, and Russians will just have to learn to eat mud.
 
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