by Jorge Vilches for the Saker Blog

The EU had already promoted and achieved all-around chaos regarding very simple yet absolutely essential trading terms urgently to be agreed with the Russian Federation. As if that were not enough, now adding fuel to the fire EU member countries continue to dangerously play their traditional fiddles while declaring that “ some contracts are holier than others, didn´t you know ? ” This daring criterion also means getting back to square one with an ever larger and riskier conflict while everybody´s patience is running thin. If Europe does not reverse course within a very limited time frame it will needlessly smash itself head-on against a very harsh reality. Once triggered, the subsequent uncontrolled demolition cannot rewind no matter how many desperate “emergency meetings” EU officials call for.

Ref # 1

Ref # 2

ground-breaking EU criterion

The EU has now come up with a ground-breaking legal criterion that international jurisprudence should rapidly adhere to and possibly improve. Thus it could include it in Treaties and other important legislation and, in view of its apparent virtues, even apply it ex-post-facto such as in this case. By the way, with this new international flat-Earth public policy, the EU would be the only party entitled to unilaterally uphold some contracts and not others per its own wishes and convenience as if it were a God-given right. Not anybody else, no way. So Europe, supposedly the cradle of Western civilization, is now trying hard to earn “The Joker” award disregarding the livelihood of at least 800 million human beings plus serious negative impact upon the rest of the world. Granted, history will not be kind with EU leaders.

800 million Europeans

Obviously, in view of the above, the interruption of Russian imports – including very specific, exclusive, and unreplaceable grades of Russian natural gas, oil, and coal – is now definetly in the cards for some or all European countries. This will necessarily impact beyond belief a still clueless population which continues to play the role of vassal puppets to Anglo-Saxon malignant dictates without actually following how they are being had.

Ref #3

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Fool me once, shame on you,…

Four weeks ago, in view of the massive seizure of its legitimate funds, Russia was left with the only option of requiring Rubles as payment for its exports as such currency is exclusively under Russia´s purview and thus cannot be freezed and/or seized by any stakeholder, EU included. And negotiations were making very definite progress along such lines up until the past week. A month ago, the only real problem was for EU countries to find Rubles other than by selling their “theoretical” gold bullion vaulted in the UK and the US which many claim is either non-existent or highly encumbered with many dozens of claimees standing in line. So the alternative viable solution wisely found up until last week was to convert euros into Rubles at Russia´s Gazprombank as it had not been sanctioned – at least not yet – as possibly the EU had foreseen its role for the proposed solution at hand. So Vladimir Putin, President of Russia, took the trouble to personally explain the exact simple two-step payment procedure by phone conversation with German Chancellor Olaf Scholz. By the way, the procedure is so simple and so straight-forward that even tie-wearing boomers can understand it.

back to square 1

But now European governments and energy companies are proudly rejecting the idea of paying in Rubles on the basis that gas import contracts clearly specify that the allowed currencies to be used for payment are only euros or dollars, not Rubles. Accordingly, they argue that one side of the deal – in this case the Russian Federation – cannot change such contractual obligation by its own decision (!). The EU now says “This is an absolutely clear circumvention of the EU sanctions.” “Opening a Ruble account at Gazprombank in and by itself may breach the EU sanctions…”

Ref # 4

a deal is a deal…

“No way to now require Rubles, it´s contractual, see ?” It does not matter that Russia´s fully contractual foreign currency accounts in euros & dollars were seized by the EU to the tune of $ 300+ billion dollars. No, that contract is to be discussed another day. This is ´different´ you see, and thus “The Czech Republic will not give in to Russia. Other countries that accept paying in Rubles are making a mistake. It is a violation of sanctions. It is legally dangerous.” Danish energy group Orsted also won´t pay for Russian gas with Rubles. “We refuse to accept unilateral demands (!!) from Russia and Gazprom”. Ref # 5

…but some contracts are holier than others (no ?)

So, as Europe badly needs natural gas, the corresponding Russian supply contracts need to be complied with, as specified, with euros or dollars – but not with Rubles. While the Minsk Agreements, duly brokered and endorsed by the same European counterparts, do not have to be complied with, what for ? Neither should Europe comply with the most elementary property rights and contractual banking rules regarding Russian funds in euros and dollars illegally seized by the EU. The Western world has unilaterally declared that contractual property rights are no longer valid so now bank accounts anywhere – or other assets — are freezable, seizable and forefeiturable. Weaponizing Swift access and use is also contractually unacceptable, yet Western powers decide upon it freely dismissing the illegality.

the Schrödinger euros“The Saker”

Last week, “The Saker” published what turned out to be a highly visible article entitled the Schrödinger euros which explained the situation simply and clearly up until that date, exposing how deceitful the EU payment-in-euros proposal was. So much so that Russia could only offer the euros-converted-to-Rubles payment alternative to avoid confiscation yet again. Many of the comments therein were highly pertinent and definitely knowledgeable, particularly JD´s most valuable input. One valid conclusion arrived at such commentariat debate was that thru the euro-converted-to-Rubles payment mechanism, into the future Russia would still run the very serious risk of a possible seizure, freezing, arresting and/or confiscation of remnant euros — not yet converted into Rubles — already paid to and duly received by the Russian side. This would include euros or dollars not converted into Rubles — or other currencies — and still held by Russia or third parties (China, India, or whoever) as a result of Russian payments or investments. Thus, remnant unconverted euros or dollars, per their Schrödinger-seizable nature, would eventually be a “hot potato” liability in whoever hands they were held, Russian or otherwise. Beware of these ´Schrödinger-seizable´ euros…

Ref # 6 Depending upon circumstances and the specific point in time that such possible risk could become real, the sums of euros – or dollars — involved could be humongous and even exceeding the $300+ billion of Russian funds currently frozen & seized. Let´s recall that these transferred euros would not be physical and, therefore, practically untraceable bills. Instead, these are very distinct digital liabilities of European banks which can be nullified at will through revocation or claw-back anytime in the future either applied on Russian holders and/or third parties at whichever domain or legal monetary jurisdiction these euros may lie at…

Other unconverted currencies received by Russia in payment for its exports – such as US dollars – from whoever else in the world also run the same possible seizability, something which would also be applicable to other countries…

In sum, the EU´s financial criteria have been transformed into a random and unpredictable quantum mechanics casino

  • The EU badly needs to keep importing Russian produce for years to come.
  • Russia is willing to sell such produce if they get effectively paid, no charity possible.
  • Russia doesn´t accept euros or dollars as they would be just as seizable as the now frozen legitimate Russian funds that have been rendered unusable per unilateral sanction applied by the EU.
  • Russia proposed to be paid by conversion of the euros received into effective Rubles under the purview of the Russian Central Bank. Once the Rubles are duly credited the delivery of Russian produce could proceed, not before. This means that the contractual obligation is only satisfied when the euro-conversion transaction into Rubles is concluded at Gazprombank.
  • The EU now objects to that and says that actually the EU payment should be considered as duly fulfilled the instant that euros are transferred and not a millisecond later. This means that Russia would be obliged to comply with the contracts whatever or whenever happens with the conversion into Rubles of the euros received.

pure-bred pedigreed ´Schrödinger-seizable´ euros

So now the EU would accept to pay for Russian imports only with pure-bred pedigreed ´Schrödinger-seizable´ euros not bastardized into Russian Rubles as such are “not contractual” and thus against the “rules-based EU”. Meaning that per the EU the payment contractual obligation would be fulfilled the instant that such pure-bred euros are transferred to Gazprombank without the need to consider any aspect of the subsequent bastardizing conversion into Rubles. The EU only cares about and acknowledges pure-bred pedigreed ´Schrödinger-seizable´ euros. Thus Russia would be obliged to deliver the goods the instant it receives such “contractual” euros at Gazprombank.

Per Al Jazeera, EU spokesman Mr. Eric Mamer stated the official EU commission position: “ If the contract stipulates that payments should be made in euros or in dollars, then the company’s obligation ends once it has made such payment in euros or dollars,” Mamer said. “If the payment takes place in Rubles, then we are no longer talking about the agreed contract terms and we are circumventing the sanctions. What we cannot accept is that companies are obliged to open a second account and that between the first and second account the euros are under full control of Russian authorities and the Russian Central Bank who says that the payment would only be complete when it is finally converted into Rubles. This is an absolutely clear circumvention of the sanctions. Opening a Ruble account at Gazprombank in and by itself may breach the EU sanctions… “

Ref# 7

So, before making any payments, EU buyers would have to get from their Russian counterparts a full agreement in writing specifying that the payment contractual obligation would be fully completed and satisfied as described above. The subsequent conversion of such euros — or dollars — into Rubles after the euro transfer has been duly credited is something under the entire responsibility and risk of the Russian authorities. Such a written statement would have to be duly approved and signed beforehand by pertinent officials from the EU and the Russian Federation. This means that, according to the EU, the instant that such Schrödinger euros or dollars were deposited – and therefore subject to seizure per the many sanctions already approved and effectively applied to Russia, or even possible future sanctions to be thought of against Russia or others – the contract has been fulfilled and Russia is obliged to deliver the goods.

… fool me twice, shame on me

So, in view of current and possible future EU sanctions, attitude and seizures, as the President of Russia Vladimir Putin clearly explained to the German Chancellor Olaf Scholz, to put it nicely the Russians beg to differ. Accordingly,

Step (1) is the transfer of euros to a Gazprombank account.

Step (2) is the conversion of such euros into Rubles per Gazprombank´s operational criteria including timing, rate conversion factors, and fees.

And only after such step (2) of euro conversion into Rubles is duly and satisfactorily concluded would the transaction be considered as completed and fulfilled.

Ref # 8

brace for impact

After Russia´s funds were seized, the way to pay for Russian produce remains unchanged from day 1:

  1. payment in Rubles thru the euro conversion mechanism proposed by Russia per the above mechanics.
  2. payment in Rubles thru the sale of gold bullion in the terms that Russia has offered from day one.

“ So the EU better be prepared to continue paying (many) billions of euros each week to Russia, supporting the Ruble and subsidizing its military in the process. It’s not just a short-term problem, either. If Germany manages over time (many years ?) to find adequate replacements for Russian natural gas, oil and coal, it will be at (tremendously) much higher prices. The era of cheap-Russian natural gas fueling the German economy is over. German energy-intensive companies, like its chemical giants, could not compete in the global market. Germany will face painful choices about the future of its industrial economy”. So without very specific and unreplaceable exclusive Russian grades of natural gas and oil and coal the huge German industrial giants run the very serious risk of shutting down continuous year-round processes which would mean irreparable harm + negative impact on the German economy and the rest of the world. Ref # 9

The European conventional military dependence on Russian fuels is beyond overwhelming, close to checkmate.

The gold card

Regarding option (B) payment in Rubles thru the sale of gold bullion, I recommend two most pertinent “The Saker” recent articles, namely

Ref # 10

Ref # 11

[ RE-published ]

Schrödinger gas for Schrödinger euros ?

As stated before, last week “The Saker” published what turned out to be a highly visible article namely the Schrödinger euros which explained the situation simply and clearly up until that date, including the “Schrödinger” details exposing how deceitful the EU payment in euros proposal was. Ref # 3

As has happened on other occasions, the above “The Saker” article was also RE-published in different specialized blogs such as Zero Hedge wherein commentariati posted comments and analysis of their own. In this occasion, “not-me—it-was-the-dog” posted an interestingly creative comment which paraphrases highly pertinent aspects with refined sarcasm, namely

“… In exchange for so-called Schrödinger Euros, now Vladimir Putin ´the merciless´ has decreed the creation of Schrödinger NatGas, whereby GazPorn would thus “print” cubic meters of natgas with a keyboard 100% for free and then transfer such gas over to the European purchaser’s storage tanks in the EU albeit now under “frozen” status.

So Russia never gets to use such euros – which actually never see the light of day – and accordingly are not inflationary in any and every sense of the term as nobody else can use them either, and Europe never gets to burn such gas – which actually never sees the light of pilot – and accordingly does not contribute to global warming!

Thus, by not entering into any economy at all in no way, shape, or form the EU and Russia can exchange lots of nothing for free, and Greta will squirm with delight. Easy see ?


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