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Russia's Gazprombank is the intermediary for rouble gas payments, Putin order says

#21

I think this article by Pepe Escobar explains the situation quite well:

‘Rublegas:’ the world’s new resource-based reserve currency

April 02, 2022

Rublegas is the commodity currency du jour and it isn’t nearly as complicated as NATO pretends. If Europe wants gas, all it needs to do is send its Euros to a Russian account inside Russia.

By Pepe Escobar, posted with the author’s permission and cross-posted with The Cradle

The Russian ruble is sitting pretty right now, having regained its pre-sanctions value and set to become a major commodity currency. Photo Credit: The Cradle

Saddam, Gaddafi, Iran, Venezuela – they all tried but couldn’t do it. But Russia is on a different level altogether.

The beauty of the game-changing, gas-for-rubles, geoeconomic jujitsu applied by Moscow is its stark simplicity.

Russian President Vladimir Putin’s presidential decree on new payment terms for energy products, predictably, was misunderstood by the collective west. The Russian government is not exactly demanding straightforward payment for gas in rubles. What Moscow wants is to be paid at Gazprombank in Russia, in its currency of choice, and not at a Gazprom account in any banking institution in western capitals.

That’s the essence of less-is-more sophistication. Gazprombank will sell the foreign currency – dollars or euros – deposited by their customers on the Moscow Stock Exchange and credit it to different accounts in rubles within Gazprombank.

What this means in practice is that foreign currency should be sent directly to Russia, and not accumulated in a foreign bank – where it can easily be held hostage, or frozen, for that matter.

All these transactions from now on should be transferred to a Russian jurisdiction – thus eliminating the risk of payments being interrupted or outright blocked.

It’s no wonder the subservient European Union (EU) apparatus – actively engaged in destroying their own national economies on behalf of Washington’s interests – is intellectually unequipped to understand the complex matter of exchanging euros into rubles.

Gazprom made things easier this Friday, sending official notifications to its counterparts in the west and Japan.

Putin himself was forced to explain in writing to German Chancellor Olaf Scholz how it all works.

Once again, very simple: Customers open an account with Gazprombank in Russia. Payments are made in foreign currency – dollars or euros – converted into rubles according to the current exchange rate, and transferred to different Gazprom accounts.

Thus it is 100 percent guaranteed that Gazprom will be paid.

That’s in stark contrast to what the United States was forcing the Europeans to do: pay for Russian gas in Gazprom accounts in Europe, which would then be instantly frozen. These accounts would only be unblocked with the end of Operation Z, Russia’s military ops in Ukraine.

Yet the Americans want the war to go on indefinitely, to “bog down” Moscow as if this was Afghanistan in the 1980s, and have strictly forbidden the Ukrainian Comedian in front of a green screen somewhere – certainly not Kiev – to accept any ceasefire or peace deal.

So Gazprom accounts in Europe would continue to be frozen.

As Scholz was still trying to understand the obvious, his economic minions went berserk, floating the idea of nationalizing Gazprom’s subsidiaries – Gazprom Germania and Wingas – in case Russia decides to halt the gas flow.

This is ridiculous. It’s as if Berlin functionaries believe that Gazprom subsidiaries produce natural gas in centrally heated offices across Germany.

The new rubles-for-gas mechanism does not in any way violate existing contracts. Yet, as Putin warned, existing contracts may indeed be stopped: “If such [ruble] payments are not made, we will consider this to be the buyers’ failure to perform commitments with all ensuing implications.”

Kremlin spokesman Dmitri Peskov was adamant that the mechanism will not be reversed under the current, dire circumstances. Still that does not mean that the gas flow would be instantly cut off. Payment in rubles will be expected from ‘The Unfriendlies’ – a list of hostile states that includes mostly the US, Canada, Japan and the EU – in the second half of April and early May.

For the overwhelming majority of the Global South, the overarching Big Picture is crystal clear: an Atlanticist oligarchy is refusing to buy the Russian gas essential to the wellbeing of the population of Europe, while fully engaged in the weaponization of toxic inflation rates against the same population.

Beyond Rublegas

This gas-for-rubles mechanism – call it Rublegas – is just the first concrete building block in the construction of an alternative financial/monetary system, in tandem with many other mechanisms: ruble-rupee trade; the Saudi petroyuan; the Iran-Russia SWIFT- bypassing mechanism; and the most important of all, the China-Eurasia Economic Union (EAEU) design of a comprehensive financial/monetary system, with the first draft to be presented in the next few days.

And all of the above is directly linked to the stunning emergence of the ruble as a new, resource-based reserve currency.

After the predictable initial stages of denial, the EU – actually, Germany – must face reality. The EU depends on steady supplies of Russian gas (40 percent) and oil (25 percent). The sanction hysteria has already engineered certified blowback.

Natural gas accounts for 50 percent of the needs of Germany’s chemical and pharmaceutical industries. There’s no feasible replacement, be it from Algeria, Norway, Qatar or Turkmenistan. Germany is the EU’s industrial powerhouse. Only Russian gas is capable of keeping the German – and European – industrial base humming and at very affordable prices in case of long-term contracts.

Disrupt this set up and you have horrifying turbulence across the EU and beyond.

The inimitable Andrei Martyanov has summed it up this way: “Only two things define the world: the actual physical economy, and military power, which is its first derivative. Everything else are derivatives but you cannot live on derivatives.”

The American turbo-capitalist casino believes its own derivative “narrative” – which has nothing to do with the real economy. The EU will eventually be forced by reality to move from denial to acceptance. Meanwhile, the Global South will be fast adapting to the new paradigm: the Davos Great Reset has been shattered by the Russian Reset.

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#22

Ps, I hope this turns out to be true:

“Meanwhile, the Global South will be fast adapting to the new paradigm: the Davos Great Reset has been shattered by the Russian Reset.”

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#23

I think you can gamble on Pepe’s last line, Rich. The WEFoids’ dream scam is definitely in Queer Street. The good folk over at Off-G still think that Russian and China are in on it, though, and therefore - they believe - it’s still viable. I doubt that interpretation, even though I don’t expect either the Russian or the Chinese empires to be any better than they should be. But their policies, post VVPutin and Xi Jinping, I’m confident will not be subservient to the WEF schemes. Nor is there any likelihood of it whilst those two patriots are leading their countries.

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#24

Rich, Pepe alludes to what I said earlier; although he doesn’t say it directly: by putting payments/exchange directly through the Russian banking system, the Russian banking system earns a huge amount in commission, commission that is no longer going to the American banking system.

The only honest currency is barter. The rest is mostly illusion.

I have some chickens. Would you like to swap them for some of the veg you’ve grown this year? etc, etc.

#25

A point made by Dmitry Orlov is that when Gazprombank receives euros for gas, which buyers must deposit in Russian accounts at Gazprom, St.Petersberg, the bank then offers the euros for sale internally, on the Russian foreign-exchange market, for rubles. When gathered, these are then paid to Gazprom, to get gas released to the buyer.

Naturally, with such big flows of euros, USD, whatever, chasing a relatively modest level of offers to buy, this will bid up the price of the ruble against foreign currencies.

Or the would-be buyers of gas can find rubles on the world foreign exchange markets and present them directly to Gazprombank - in Russia, of course - with the same effects on the ruble’s rising exchange rate.

Net result: all transactions are kept in Russia, out of the reach of the thieving USuk gangsters, who have simply been stealing countries’ assets held abroad, in countries over which the US has mafia power. Plus: the ruble has recovered just about all the losses it suffered at the start of the Russian SMO in the Ukraine, and is set to rise further.

Say hello to the gasruble; closely followed by the oilruble, the wheatruble, the nickelruble, and on…

If you’re into speculative trading on the foreign exchange markets, rubles are looking like a very good prospect right now; likewise the yuan. So long as you hold them in Russia or Shanghai, where the mafias can’t steal them…

Geopolitikal result: the Anglozionist empire and its brown-noser camp-follower states simply daren’t attack Russia militarily, since they’re right now getting the shocking realisation that they would suffer catastrophic defeats any way they look at it; and their only other - supposedly - effective weapon - sanction everything to buggery - is simply blasting their own feet out from under them, hastening their already baked-in decline and fall, whilst inflicting only minor injuries on the Sino-Rus economic zone.

No wonder their only recourse left is spectacularly-lying, hysterical propaganda, and risibly-transparent false-flags. In the village near where I live, the odd dork actually flying the Ukraininan flag in his garden is regarded, amongst the savvy, as someone simply advertising what an utter propa-sucker mooncalf he is… :rofl:

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#26

Below are the last two paragraphs of Ellen Brown’s article at unz. How do we know the USA has not ‘planned’ the demise of the dollar in order to allow a re-industrialization policy? Paid by European vassal states and Japan.

It’s foolish in my opinion to attribute stupidity to either Russian leaders or the USA elite. There may be long term advantages to allowing the dollar to lose its status as the world’s reserve currency. If the dollar drops USA produced goods will be more in demand. The USA has a highly educated workforce, plentiful energy supplies, a huge expanse of agricultural land. Turmp’s ‘Make America Great Again’ strategy was popular with some segments of the USA elite as well as a lot of the USA voters. Quite quickly, by demonizing China and Russia, and going on a ‘war footing’, the USA and policy planners could industrialize again and become a ‘production oriented’ economy again.

https://www.unz.com/article/the-coming-global-financial-revolution-russia-is-following-the-american-playbook/

Exorbitant Privilege or Exorbitant Burden?

If that system succeeds, what will the effect be on the U.S. economy? Investment strategist Lynn Alden writes in a detailed analysis titled “The Fraying of the US Global Currency Reserve System” that there will be short-term pain, but, in the long run, it will benefit the U.S. economy. The subject is complicated, but the bottom line is that reserve currency dominance has resulted in the destruction of our manufacturing base and the buildup of a massive federal debt. Sharing the reserve currency load would have the effect that sanctions are having on the Russian economy – nurturing domestic industries as a tariff would, allowing the American manufacturing base to be rebuilt.

Other commentators also say that being the sole global reserve currency is less an exorbitant privilege than an exorbitant burden. Losing that status would not end the importance of the U.S. dollar, which is too heavily embedded in global finance to be dislodged. But it could well mean the end of the petrodollar as sole global reserve currency, and the end of the devastating petroleum wars it has funded to maintain its dominance.

#27

Hi @Everyman

You ask:

and

A few thoughts:

  • it’s not uncommon for trade to continue even during wars. This happened throughout WWII between Germany and the Allies, the cold war etc. Russia is sticking to precendent here. They seem to be sticklers for the rule of law, and the honouring of contracts. Unlike the EU.
  • Euros are very useful for the Russian Central Bank to hold. They can pay off their euro-denominated international debts, for example, and avoid being seen as a defaulter. Everything Russia is doing, financially, is broadcasting trustworthiness, lawfulness and financial stability out to the wider world. Thats true whether the Europeans are acknowledging that or not… every other trading partner of Russia is seeing what’s happening, and that’s a bigger pool than just the EU.
  • The big problem (as the article by Escobar points out above) was that Russia had euro-denominated bank accounts inside the EU in EU banks. Companies would “pay” for the gas they received into these bank accounts, but if Russia tried to withdraw money from those accounts, or pay bills from those accounts they were blocked. By making the EU pay those same euros into a Russian owned euro account, we can’t stop them spending the euros on things they need (as long as they can find someone willing to accept euros from them), thus bypassing the sanction of their banks.
  • The mechanism that Russia has come up with means that, to all intents and purposes, no change to the gas purchasing contract has occured - the price, the currency, the quantities etc. are all the same. Only the bank account changed. It’s hard to see how a legal “breach of contract” case (which Germany threatened to do) could be brought against Russia under this change.
  • However, when these current contracts end, Russia has already laid the groundwork to say that “going forward we want to be paid directly in Roubles and cut out the extra step of euro accounts” and the new contracts will have to honour that. Or not get the gas.
  • Finally, it’s not clear to me that Russia wants to “hurt the EU”. I don’t see evidence of that. I think the Russians would prefer it if we stopped fucking about, and started treating them as equals. They have taken none of the (many) steps that they could take to really hurt the EU. I don’t think they want to extend the conflict that they are embroiled in any further, and are simply acting as grown ups handling a child having a tantrum. No need to have a tantrum in return. The cost to Russia of doing nothing is arguably lower than the cost of them taking steps to target the EU. They are raking it in at the moment with the high energy and commodity prices, their economy is doing fine, their currency is strengthening, their people are supportive of the government and well fed. All the negatives are hitting the EU. Russia doesn’t actually need to do anything in return. Why upset that apple cart?

Hope those thoughts are helpful.

Cheers
PP

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#28

Thanks PP, that’s very clear, however:

Aren’t the sanctions aimed also at preventing the Russians from SPENDING the euros they accumulate, on things they need? Apparently just about every segment of trade with Russia is banned…so the Euros are worthless, no?

I would think the Russian soldiers and their families see the need for a ‘tantrum’ if they are being used to just try and make the EU not act like children. If Russian soldiers are dying, being tortured, why NOT make the EU ‘hurt’? Especially when the EU is providing weapons (including, apparently, from UK, state of the art ‘lightning streak’ manpads that the Russian air force currently cannot defend against) and training and logistical support and intelligence (ie targeting) support and mercenaries, all of which/whom is being used to kill Russian soldiers.

So, in the sense that Russia is supposedly fighting an ‘existential war’, I find it confusing that they continue to allow EU to pay in Euros. Typically the contracts are for years also…so it doesn’t, short term, really change the situation in the EU.

#29

Yes, but only to some extent. And one way they accomplished that was by freezing the euros in the EU banks, which the new arrangement curcumvents. In any case, I’m sure that repaying debt to EU banks is almost certainly exempted from sanctions. And you can spend euros with other countries who might want euros (Turkey maybe? African countries?) Those cannot be easily stopped if the Russians have euros to spend. Or you sell the euros on the Russian stock market and buy gold instead.

Yes, of course. The “tantrum” is the EU sanctions which will not change the course of the war in Ukraine one jot. I’m sure the Russians are taking appropriately brutal action against those who seek to kill their soldiers on and off the battlefield. It’s the question of tit-for-tat financial shenanigans that I was mainly referring to.

Cheers
PP

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#30

Very good to see your logo springing up here again, P. Been worrying about you! I hope all’s going well…?

And I agree with what you’re saying here about Russia.

In the matter of what USAmerica does now to pull itself back into a better state of life: Well, first it has to get through its collapse-of-USSR period; long overdue, and now coming on quickly. Jim Kunstler and John Michael Greer, amongst other sober wisdom-keepers, remain steadfastly sensible about what a healed and imperially-reduced USA can look like - even including, perhaps, the loss of the U…

But certainly what they’ve been doing lately has to come to an end; and that’s in train right now; including using the dollar as a rip-off device to garner the world’s goods for either nothing or next-to-nothing; simply spinning the printing presses and handing out green loo-paper. That’s what it’s going to be for those still holding it when it follows the fate of all un-backed fiat currencies, and goes to zero.

By the way, my bet is that the current debacle that the US is entering isn’t the result of machiavellian, cool, rational planning by super-canny ‘elites’; much more the result of the delusional thinking which seems to engulf all imperial ‘elites’ during their decline-and-fall phase.

The political bosses of Russia and China do well to go on steadily sticking to the legal agreements that they make, and wait whilst the DC Swampies de-tantrum and start getting rid of their current ‘not-agreement-capable’ status in the world. Their empire is going down, and they’d better get used to it. The NAmerican island has plenty of scope to run a reduced, but still highly viable country, as long as they just stick to that, and stop chasing this futile delusion of ruling the entire planet.

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#31

Michael Hudson’s latest take on it:

#32

I just read that from Hudson Rhis and wouldn’t you say that in fact he disagrees with you? That in fact the USA elite have a quite rational plan and Europe, which seems the real delusional party, seems to be going along with it.

Thanks for the response PP, very clear, though perhaps overly optimistic at this point. That is, if you look through Hudson’s article linked above from Rhis, Hudson thinks the USA has a workable financial plan. So, for example this statement from you:

depends on the degree to which the USA can prevent other countries from helping Russia spend its euros that it received for gas and other commodities. From the successful vote in the UN today it seems USA still has the power to twist a lot of arms, though the world knows the reality of USA/NATO war mongering.

So, thank you for helping clear up some of my confusion. I suppose it’s a question of strategy concerning realities I really know little about. But, from my limited view, it seems that Russia is allowing the EU to get away with paying in euros, and that may not benefit Russia, in the long run, because those euros may become ‘non liquid’, if countries bow to USA sanction pressure, and meanwhile EU will be finding other sources for fuel, even at the cost of pauperizing EU citizens.

So, why not make Europe pay NOW with rubles? Before the EU totally finds new suppliers? Finland is working hard to not buy anything from Russia. The EU will follow suit given enough time. Hungary is paying rubles NOW…why not Germany? I still don’t get it…

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#33

ps

but why would they pay off their debt to EU banks when the EU has stolen their money?

#34

The Eurolemmings - that’s DC’s bought-fools who run the whole enterprise, not the common citizens - are certainly going along with it, E, corrupt fools on the take that they are. And sure, the DC plan such as it is seems to be just another instance of ‘may you [Europe] die today, so that I may survive until tomorrow’. But tomorrow brings an Anglozionist empire on its last legs, with no further workable scams to stave off its inevitable Russia-in-the-1990s time; after which USAmerica (if the U still applies) will be a different, much lesser power in the world, with wings seriously clipped. I don’t see any credible faction amongst the Swampies which is seriously in touch with that underlying reality. None of their current apparent plans suggest so.

Remember too that The Limits To Growth continue to grind on, and even asset-heavy Russia will run up against them eventually; whilst - absent its continuous diplomacy to garner resources from trading partners around the world - China is already well into the maw of The Limits. Ultimately, nowhere will be immune.

That all-encompassing reality, of course, isn’t yet acknowledged in anyone’s plans, though all will come up against it eventually.

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#35

Hi @Everyman

I might be overly optimistic, but so far I don’t see a lot of signs that the sanctions are seriously hurting the Russian economy. Perhaps that will change as time goes on. I also don’t think that the Russians will have difficulty spending Euros as they still have plenty of friendly nations around the world who would accept them if necessary. Iran is a master of working around sanctions, and I think Russia will prove pretty adept at it too. In the end I don’t think that it makes too huge a difference at this point if Russia gets paid in euros or in Roubles, as long as the payment actually ends up in Russia. In the long term, forcing countries to buy Roubles to buy commodities will massively strengthen the Russian currency, but I’m not sure that’s their eventual aim. It depends on the power sharing dynamic they want to arrange with China and other parties.

I think that Hudson is on the money (so to speak) and his analysis makes a lot of sense to me. I can see what the US is getting out of this, but I honestly can’t see what the EU countries are getting out of this except pain, economic recession and US serfdom. Something doesn’t add up for me. Unless it’s part of their way to reset their economies WEF-style using a massive shock therapy and blaming the Russian bogeyman… Wild speculation on my part, clearly.

In terms of cutting off gas to Europe, I think that psychologically Russia is pivoting totally eastward already and doesn’t care a fig if the EU end up giving up Russian gas…I think they will have other customers in Eurasia very soon to replace a good part of what the EU buy. It seems to me that Russia feels it to be more important to abide by it’s contracts and legal obligations than cut off it’s gas as a retaliatory measure. I don’t see what advantage Russia would gain by weaponising their primary exports. It would make other customers fearful, would open them up (fairly or unfairly) to possible legal action and in the end might force NATO to go even more Batshit insane. That all seems very risky given that they are doing quite ok with things as they are…

On that subject, my reading of the recent Russia/China joint statement is that they will lead a new international order based in the rule of international law, and I think that more than anything Russia is demonstrating to the whole world (and it’s new partner, China) that it can be trusted to keep its word and stick to its obligations, partnerships and deals, even in the face of blatant provocation and illegality. Doing so in this way is currently costing Russia nothing, and is exposing the hypocrisy of the NATO bloc far better than anything that they could say at the UN, for example.

Incidentally, I was wrong in part about repayment of debts. At least in dollars, Russia is forced to pay their bondholders in Roubles. Former prez Medvedev is apparently encouraging US holders of Russian bonds to take the US govt to court to force them to allow Russia to pay in dollars. I didnt think that euro repayments would also be sanctioned, but I might be wrong.

Anyway. That’s my current understanding of this financial sitch. Who knows what tomorrow will bring. It looks like the EU might try to cut off Russian oil and gas themselves pretty soon, saving Russia the bother. Whether you agree with any of my take or not, at least I hope I’ve described my thinking clearly and that you found it useful.

Cheers
PP

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#36

If you were lucky enough to have a job that payed you 1 million quid a year, and you had no other expenses and could put that million quid into a bank each year, it would still take you at least one thousand years to accumulate the wealth of someone like Bill Gates.

There’s very few people who can’t be bought.

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#37

Oh yes PP I found it very useful, thank you very much for your detailed and clearly expressed responses.

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#38

Hi PP. Welsome back.

What makes the real difference, is that both currencies are being held in a Russian Bank. Hence no opportunity to manipulate the Russian currency. Sooner or later, the law of supply and depend will come into play here.

The price of roubles will depend on Russias needs for Euros to meet current debt obligations and future import needs. However, as sanctions force (or enable) Russia to become independant of the need for Euro bloc goods and services, the cost of buying roubles for those with Euros, goes up. The effect of this is that unless the EU bloc does something to even up their balance of trade with Russia, Russian oil and gas is going to get more and more expensive.

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#39

I wholly agree: that’s what the NATO protection racket is all about. The shoddy old guns and tanks go to the scrapyard, ie Ukraine, nice new shiny nukes are shipped over via lend-lease (“to keep us safe”… that rings a bell somehow…) and if and when the freely printed dollahs are no longer sustainable no worries: USA can be supported by the debt repayments from the serf nations.

And swapping 51st State aircraft carrier status for exemption from this lunacy, via Brexit, looks more and more like a smart move. It’s almost as though there’s a plan of some sort huh.

#40

Swapping status? Are we doing that? I hadn’t heard. What, you mean Britain is freeing itself from the arse-kissing enslavement to USAmerica that’s been in effect for all my life? Roll on!

Oh wait! We’re stepping out of the sacrificial-victim status of the continental European states, to be a side-kick executioner for the Swampies’ drain-and-discard policy towards Europe. That’s the real plan, innit? (Wonder what we’ll do when things get to the stage when Europe is drained, there are no other available candidates left for the predators, and the executioner has become definitely surplus? Well, you know what happens to worn-out old attack-chihuahuas…)