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
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.
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.
revenge is a dish best enjoyed cold..
Speaking of revenge, this is good news:
But it looks like revenge for the ukie chopper attack the other day. That would be wrong because it should have been done already long ago. Why was Kolomoisky’s refinery allowed to stand until now?
On the refinery, perhaps Russia had hoped to use it as part of its effort to restore the Ukraine economy once the war ended. But now, with the realization that yes, the war apparently will be fought to the death of the last Ukrainian soldier, leaving the plant intact is counterproductive.
There is a smaller refinery at the same site that was left intact, so some small measure of fuel will be available once the war ends.
They are minimizing attacks on infrastructure to have less to repair afterwards. That would be my guess. Blowing up a refinery owned by an oligarch will definitely send a message.
Easter is coming. The Eastern Orthodox do not celebrate their religious holidays with blood baths (real or invented and mythologized) in the judaic fashion, but even so I hope that for Easter they will pelt the Azov with something more spectacular than painted eggs.
Some readers have been suggesting shutting off Supplies to Germany/EU. It may sound surprising why Russia hasn’t done this yet but Russia has done the right thing by not shutting off Supplies so far. This develops confidence and trust on Russia. America had pressured Germany into abandoning Nordstrom2 citing that Russia can hold it to ransom by threatening to shut off Supplies. If Russia had shut off Supplies now, America would have succeeded in it’s fear mongering. By not shutting off the supplies as yet, Russia has sent a strong signal that even with so much hostilities against it including freezing it’s assets illegally, it is still supplying gas to Germany/EU, that the RF honors it’s word.
Sooner or later, the RF should and would stop supplies if Germany/EU doesn’t shed it’s anti Russian stand.
The gold-for-Rubles-for-gas should be enforced in the long run once the temporary Euros-for-Rubles-for-Gas system is implemented or better still not implemented at all
The gold-for-Rubles-for-gas seems to be a much stronger mechanism. This is the time for Russia to develop more allies from countries under American oppression.
‘Confidence and trust in Russia’. Wild West couldn’t care less about confidence and trust in Russia. Their goal is destruction of Russia, and they will use everything in their disposal to achieve it. It is not time to play ‘a good and reliable partner’ role. It is time to fight for Russia’s survival. When you fight for survival, screw mr nice guy attitude. Use everything in your disposal to destroy your enemy. Completely cut ut gas supply and all EU sanctions would be gone in a few weeks time.
When it truly becomes a race to the bottom, society ceases to exist and no one wins. When one side continues to act responsibly and is big enough not to be run over, it will weaken the other side, as the people lose respect for their leadership.
Russia has the resources to last this out. All the West has, is a metastatic banking oligarchy that cannot stop growing, or it will blow up.
I believe the saying goes; Revenge is a dish best served cold.
Excellent as usual, Pepe!
I am trying to imagine concretely how Gazprom “convert” the euros into rubles on the Moscow exchange market. Where do the rubles come from? If they come from the Russian central bank then the “only” difference from before is that the euros accounts are in Russian jurisdiction instead of EU jurisdiction. Afterall, Gazprom did convert 80% of its euros into rubles before, now it converts 100%.
And if the Russian central bank does not buy those euros, the rubles have to come from Russian private companies or individuals. And what if there is not enough demand for euros inside Russian market to convert all of those into rubles? Gazprom will deliver less gas? (only the equivalent of the rubles it receives). Does that mean that in that case the European companies need to buy gold somewhere and sell it at 5000 rubles/gram to the Russian central bank the get the rubles to pay Gazprom?
Can you please explain the mechanism in more detail?
Thanks so much
Evidently the process is constructed in such a way that the buyers hold legal title to rubles for at least an instant before they are payed to the central bank for the gas. And I think that the deposits are to be made in Gazprom banks in the EU where there is always a demand for euros. Not sure where Pepe got the Moscow angle.
The arrangement solves several problems. First, the Russians want to bolster the ruble. Second, they do not want their assets held in foreign banks seized. Third, sanctions have severely limited Russia’s ability to use euros/dollars. Saying that payment must be received by the central bank in rubles for gas to flow solves all of those problems.
Euros/dollars are deposited into a Gazprom Bank branch in the EU in a buyer’s account 1. This account is then used to purchase rubles at whatever price GB decides and that amount is deposited in buyer’s account 2. Then, the funds in buyer’s account 2 are used to make the gas payment to the Russian central bank.
The only thing that is different is that Russia is holding no funds at all in EU banks. None. The rubles are still buyer’s property until they are transferred to the Russian central bank. Russia has no use for euros/dollars anymore. Euros/dollars will all be converted to rubles while they remain the buyer’s property and long before they become property of the RF when they are transferred in payment to the Russian central bank.
Russia hardens the ruble. It eliminates its exposure to asset seizure. And it receives rubles which it can actually use. Moreover, there is a mechanism established, as you mentioned, whereby the Russians will sell rubles for gold in the event that buyer’s wish to proceed that way. But that was set up more to begin the process of pegging the ruble to gold in the long run.
Long story short, this is rock solid hard evidence that the Russians are seriously turning away from Europe.
Today 3/3/22 (Australia) I’m reading on Zero Hedge –“Gazprom Has Stopped Deliveries Of Russian Gas To Germany Via Yamal-Europe Pipeline.” But it’s not just the Germans who must now make due without Russian gas supplies. British energy major Shell is being cut off from Russian supplies in response to the UK’s economic sanctions on Russia, said Dmitry Peskov, the press secretary of Russian President Vladimir Putin.
“London wants to be the leader of everything anti-Russian. It even wants to be ahead of Washington! That’s the cost!” Peskov outlined.
The Uk is the only country to shut down Gazprom Bank. Without that bank they are unable to pay for gas. That was the point of Peskov’s comment.
Rock solid until GB is ousted from the system, and no-one accepts it’s ‘credits’ seems more likely. I thought offering Rubles for gold at a fixed price was brilliant, and extending it to other precious metals, silver etc. and even industrial metals like copper, zinc, tin and nickel would make sense too as these are tangible assets which cannot be cancelled by fiat/keyboard confiscation. This looks like a reboot of accepting promissary notes for something real.
“Gazprom banks in the EU”?
Can’t anything in the EU banks be seized? Haven’t we already seen that happen? If buyer establishes a Gazprom Bank account in Russia it is safe from seizure. Why would the RF (Gazprom Company). want to have anything in any European bank under the present circumstances?
The Rouble is the sovereign currency of The Russian Federation. It is created out of thin air by the Russian Central Bank.
Most Important…. the Payment Currencies must be deposited into an account at a bank within Russia..
This specifically means that “good funds” must be transferred.
The FOREX conversion happens at the Moscow Exchange, at rates set by the Russian Central Bank.
This amounts to a “fix” similar to the gold “fix” Ie: the Russian Central Bank sets the conversion rate.
Given there are very few Roubles in existence outside Russia, there is no large “float” of Euro/Amer Roubles to digest.
In any event the amount of Roubles required to finance existing Russian Exports is so large that those would be sucked up within days…
This eliminates the existing system wherein US/UK dominated exchanges use USD/EUR/BP deposits created out of thin air to sell off the Rouble for the purpose of keeping it under valued. This is the same mechanism used to kill the Venezuelan Bolivar and the Iranian Rial..
The game changer is shifting Rouble FOREX to Moscow, exclusively…
Geo-political matters are climaxing…. Pakistan’s PM is threatened with removal by the US for not toeing the line, and permitting the US to have bases there… Matters in Islamabad are red hot… Khan is in possession of “secret” emails detailing the plot… likely provided by Rus/Chinese intelligence…
All of which is amazing considering that Imran Khan visited Moscow and got both Wheat and a pipeline on favorable terms with the Pakistani Rupee as payment currency.
Should the US win… Pakistan would need USD… which Pakistan does not have…
But Pakistani pols can be bought cheap… at least until now…
The the Russian Central Bank is the one selling Roubles for Euros?
What I’m missing is – what does it do with those Euros if it can’t use them because of the sanctions?
Sell them to Chjna, which still trades with Europe? Or Turkey.
Or sell them to England which still trades with Europe?
“Fog on the Channel; Europe isolated.” — famous English headline.
Selling Euros to Chinese or Turks in return for what? Surely we are talking about huge sums of monies… $Billions
Yuans, Rupees, commodities, gold, silver….
International currencies are purchased in the currency markets. Same as stocks in the stock market. Russian rubles are issued by the Russian central bank just like all other G20 countries. Foreign currencies can be exchanged for any other foreign currency at the current exchange rate, set by the market. Gas buyers need to have a Ruble bank account at a Russian bank. They send their Euros to the bank as payment, and the bank exchanges it to Rubles and credits the buyers Ruble account. The Rubles are then paid to GazProm from the buyers Ruble account. As Putin said, this is very simple.
“They send their Euros to the bank as payment, and the bank exchanges it to Rubles and credits the buyers Ruble account.” Ok, What Russian bank is goiing to do with USD or EUR then???
“What Russian bank is goiing to do with USD or EUR then???”
The russian bank will put the USD/EUR up for sale on the open mafket in Moscow.
Venezuela could work the same system.
And who would buy Euros in Moscow? I assume sanction are still enforced and Russians won’t be able to transfer such Euros out of Moscow!
The Russian Central Bank can issue any amount of Rubles. The Euros/Dollars the Gazprom Bank converts into Rubles can be used to buy anything from any country, except certain items on the sanctions list. The difference is merely that a Russian institution (Gazprom Bank or the Russian Central Bank) holds the Euros/Dollars instead of a Bank in Europe or the US, where they can be confiscated.
Even in the unlikely event the West were to impose a total trade ban on Russia, countries including China, India, and most non-Western countries are unlikely to follow suit because they need fossil fuels, grains, fertilizers and other commodities from Russia. In other words, Russia can still use the Dollars/Euros as payment outside the US and Europe.
Selling them, holding them, buy gold and else. What matters is the demand for ruble — so it can level to value that corresponds more or less to the demand for energy.
And if Washington wishes to sanction everyone who buys euros or dollars from Russian banks, it will have to sanction literally everyone. Which will turn the situation inside out, with the USA expelling itself from the world.
All these years the USA has been imposing and relying on Russia’s goodwill. Finally that goodwill is being withdrawn, leaving the USA and Europe in the well-known Wile-E-Coyote position.
Before Russian directive, German gas-importer buys gas from Gazprom by placing order and telling bank to pay. Say cost is one million euros. Bank determines how many roubles equals one million roubles using fixed rate, say 1 euro = 3 roubles. So bank now has 3 million roubles to pay Gazprom. But Gazprom uses floating rate to determine how many roubles equals one million euros, say 1 euro = 2.5 roubles. That means gas only cost 2.5 million roubles. The bank keeps the extra 500,000 roubles.
Now with Russian directive, Gazprom has eliminated bank and replaced it bank based in Russia. Now that bank can keep extra 500,000 roubles or can give more favorable terms to gas importer on fixed rate, say 1 euro = 2.75 roubles. Now it returns 250,000 roubles to gas importer and keeps 250,000 roubles for itself. But western bank gets nothing.
What Russian directive does is eliminate western bank from making any profit from gas importer business with Gazprom. Is punishment for freezing Russian currency reserves.
Thanks for the explanation, Sergei. If I can now paraphrase…
So hypothetically in your before case, the western bank was making 500k roubles in profit.
Now the western bank makes nothing because the importer’s gas bank account is created in a Russian bank. No risk of asset freezes by western bank. No profits for western banks either.
It may be that accepting Euros is only temporary, until the Rubles as the currency of purchase is established. At some point Moscow may instruct Gasprombank to require payment for rubles by unfriendly countries in gold.
I assume that all new contracts will specify rubles, except perhaps by agreement. So the euros will accumulate for 2-3 years.
However i assume Russia imports stuff from other places that use euros eg Africa and Latin America as well as Turkey so I am guessing quite a few will be used
Wow, they really know how to hurt “the West”! Hit the banks’ profits.
Thanks for raising this question. You are not the only one who is puzzled.
BN, previously if the Russian central bank produced a billion dollars worth of rubles, that would cause massive inflation in Russia.
Now there is a shortage of rubles because Russian commodities must be purchased in that currency.
When the Russian central bank creates those rubles it will not be inflationary within Russia.
Each new ruble is a net gain for Russia.
And a net loss for the dollar euro or pound sterling it replaces in international currency markets.
Russia may end up a trillion dollars worth of rubles richer, without causing inflation at home.
I think that is why the West is so upset.
Pepe…apocalyptic words.. i think the U. S. won’t daré no more to freeze country assets, because they have a New protectors in Town. Russia and china..
Too late! No one will trust them ever again. They stepped on a massive land mine, and their remains are now shredded.
Greed is the ultimate form of stupidity.
Just desserts are well-served.
“Davos Great Reset has been shattered by the Russian Reset”
And just like that – sea change.
Ain’t it grand?
Pepe has been saying this for almost 20 years though!!!! Do not count chickens before they are hatched. Pepe declared ” victory” back when Obama just got into the WH, and then the ousting of Lulu and the situation in South Africa threw a monkey wrench in it. Things are looking up now, but what if Khan and Orban get ousted, etc? Victory is close, but by all means still up in the air.
Pepe is a great composer of information. Predictions don’t follow present facts. The unknown factors are what create the divergence from the prediction to the new reality. It’s all of what makes life so interesting.
But, it all begins with the accurate information. And Pepe is the best at this.
Sometimes life can be grand.
This is one of those times.
If you live in the West, things are going to go south really fast!!! The rest of the world won’t be that much better. It is changing of the guard, nothing more, nothing less.
The idea that the basis of all economics, hence money, are natural resources and physical production was articulated in a 2007 book entitled “We Hold These Truths: The Hope of Monetary Reform.” It’s on Kindle. Russia understands this. The US does not.
«the basis of all economics, hence money, are natural resources and physical production was articulated in a 2007 book»
That is not something that someone discovered in 2007 even if it was re-articulated in 2007.
The financial side of the economy however has a huge influence on the *distribution* of ownership of natural resources and income from physical production, and that is a very big of political economy studies too.
So the political economy is at the same time a huge production machine, and a complex set of balance sheets and movements among them, and a set of markets and transactions within them. The huge production machine aspect is the most important, but the balance sheets and markets one are both very important to distribution of ownership and income.
If so, then Russia saves the world from the Davos ‘Great Reset’.
My sincere thanks to VVP, his advisors, and the Russian people for taking on this great task.
Can anyone anticipate Western counter measures? Besides war, what can the collwest do?
They can’t do anything, the fact they failed to pressure other countries to adopt sanctions against Russia demonstrates that. If they add more sanctions from their own side, Russia will just deal with other countries instead. And going at war with russia would be a political suicide.
They’ll keep throwing public tantrums until they’re erased from history.
…the first thing that comes to mind is for the West going for a coup or color revolution using their 5th-6th column proxies inside Russia. Let’s hope there’s effective contingency plan to deal with those circumstances.
…and I just read the following on the global research written by P.C.Roberts:
“In the Russian government their most powerful person is the head of the Russian central bank whose policies serve the West and not Russia. Putin, despite the warnings from Russia’s only economist, Sergey Glazyev, trusts the pro-American head of the Russian central bank with Russia’s future. The Russian central bank, which has never served Russia, is Washington’s greatest asset in its hopes to defeat Russia. It is Putin’s blindness to this threat that is the dagger at Russia’s heart.”
Paul Craig Roberts is just a particularly stubborn 6th columnist. He will forever be spelling doom and gloom for Russia despite all the evidence to the contrary. Seriously, what is it that he has on offer apart from his own conjecture? I have come across quite a few of his ’predictions’ about Russia, but not even one submission on the subject where he admits that he has been wrong. His infallibility seems to be his very working hypothesis.
My own conjecture is, I believe, somewhat more sensible. To wit: Zone A is so rabidly anti-Russian due to ever more severe setbacks and defeats at the hands of the Russian government that it has destroyed the minuscule Russian 5th column in the process. Here, Medvedev serves obvious case in point. Navalny and similar
Paul Craig Roberts is just a particularly stubborn 6th columnist. He will forever be spelling doom and gloom for Russia despite all the evidence to the contrary. Seriously, what is it that he has on offer apart from his own conjecture? I have come across quite a few of his ’predictions’ about Russia, but not even one submission on the subject where he admits that he has been wrong. His infallibility seems to be his very working hypothesis.
My own conjecture is, I believe, somewhat more sensible. To wit: Zone A is so rabidly anti-Russian due to ever more severe setbacks and defeats at the hands of the Russian government that it has destroyed the minuscule Russian 5th column in the process. Here, Medvedev serves as an obvious case in point. Navalny and similar Bob-entities are what remains.
They can legislate to forbid their companies to open bank accounts in Russia.
But then it won’t be sanctions against Russia but against their own economy. The perception of (and resistance to) those measures will be quite different. The pain would be on the west side too.
Here is a counter measure the US instituted, it freed itself from its own sanctions in large measure.
from the link:
DEPARTMENT OF THE TREASURY WASHINGTON, D.C. OFFICE OF FOREIGN ASSETS CONTROL Russian Harmful Foreign Activities Sanctions Regulations 31 CFR part 587 GENERAL LICENSE NO. 6A
Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates, the Coronavirus Disease 2019 (COVID-19) Pandemic, or Clinical Trials (a) Except as provided in paragraph (c) of this general license, all transactions prohibited by the Russian Harmful Foreign Activities Sanctions Regulations, 31 CFR part 587 (RuHSR), that are ordinarily incident and necessary to: (1) the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to, from, or transiting the Russian Federation; (2) the prevention, diagnosis, or treatment of COVID-19 (including research or clinical studies relating to COVID-19); or (3) ongoing clinical trials and other medical research activities that were in effect prior to March 24, 2022, are authorized.”
The constant, very noisy barking about sanctions plus NATO:s Stoltenberg blathering about ”Article 5” are pretty much everything which zone A can do at this point, except of course piling on more triumphs in its ’PR war’.
The beauty is that not only have Russia and China scored a series of victories against the collective West including right now in Russia’s gas war with the rabid, Nazi-loving Eurotrash. Indeed, what has ultimately been decisive for this to happen is that Russia and China had George Soros and his Open Society Foundation booted out forever from their territory. It remains to be seen for how long this will go unnoticed in zone A.
What MMT’rs have been trying to say for over a week now Pepe.
Why they are so far ahead of everybody else. MMT’rs were The only ones who didn’t miss it. Over a week before it happened.
By Using the actual Balance sheets and avoiding all the gold standard, foreign reserves nonsense that clogs up the internet. From the far right gold bugs who have no idea what they are talking about. Like Zero Hedge that is full of gold bugs who didn’t see what was coming down the track a week ago.
Gazprombank is acting like the new Russian central bank as far as the Eurozone is concerned – holding TARGET2 promises on behalf of the Bank of Russia, who will either have an actual EUR account at Gazprombank, or Gazprombank will be holding EUR ‘in trust’ for the Bank of Russia. The Bank of Russia then issues rubles onto the MITEX exchange as it always has done .
Countries need commodities for consumption, not to act as means of settling transactions. Gold might be used for that purpose (since industrial uses are limited), but the two sides of the transaction need to be in the same place for it to be practical. Which means that countries leaving their gold there have to trust the local government.
So we cannot really think of “commodity-backed currencies,” rather that the fiat currencies of commodity producers will be attractive. That’s the best way to think about it.
We will see further attempts for “non-aligned countries” to back away from the U.S. dollar denominated trading bloc. This will increase their political manoeuvring room, but the implications for inhabitants of the developed countries within the “U.S. dollar bloc” is limited.
It is not the silver bullet everyone thinks it is.
Europe wanted Gas – Russia wanted paid. That’s just about it.
Russia had the option to switch off the taps. Stopped the offensive in Ukraine and went defensive to prolong the war as long as possible, saved lives and got the pop corn out and watched the EU turn on itself. As the EU is not as United as it says it is. They would have signed any peace agreement put in front of them in no time. Russia would have got everything it asked for.
Could have made countries really think about EU membership and NATO membership after the taps were turned off. But, decided not to go down that route and keep appeasing its haters. Which is quite incredible considering what the West has done to Russia.
For me it was a step back. I think Putin has missed a HUGE oppertunity here.
I always believed and stated many times on here over the last week. That Putin would complete what he promised before the start of the operation. My only concern was he wouldn’t follow through economically.
It’s a small win. Not as big as the media or gold bugs are making out.
There is a natural trade match between Russia, China, and many “non-aligned” countries. The only plausible “reserve currency” appears to be in China, possibly with the use of gold held in custody somewhere to allow it to be used to settle flows.
Although such a possibility brings out the “decline of the West/loss of reserve currency status,” crowd, it’s a nothingburger from the perspective of the West.
Given the accounting identities, outflows from Western currencies have to matched by corresponding inflows. All that can happen is that the prices of the currencies (exchange rates) have to move.
The events of recent years hopefully have made corporations more cognisant of the risks associated with offshoring, and we might see less deflationary pressure from cheap imports. Although strengthening currencies elsewhere might exacerbate this trend.
How far can that go without causing grief for economies trying to use an export-driven growth strategy? As a strong currency kills a countries exports.
Even as China shifts from that strategy and trying to move to running a trade deficit, other countries are starting to enter into export led growth for the first time.
In 20- 25 years time when the asset strippers start knocking on Russia’s borders wanting to asset strip the place again. Most of Europe Will have Made other arrangements for gas or moved to alternative energy sources . so will Russia have the same leverage ? Because these psychopaths won’t stop they’ll keep knocking.
Will this move eventuality turn into a big win for Russia, and will this new payment system “really” make countries focus and think about EU membership and NATO membership ?
Only time will tell.
I’m wondering: maybe Pepe Escobar isn’t overly optimistic. The Empire of Chaos is foaming at the mouth to destroy Russia. Even some Russians do not realize the intense hatred of the West for Russia.
This is actually what keeps me awake at night. The Ruling Elite in the US (remembering the “President” is nothing more than a façade), have always regarded everyone else’s assets / resources as “theirs by right”. Russia is both very effectively denying that perceived “right”, but by doing so, giving others ideas on how they too can detach themselves from the yoke of American exceptionalism.
This is the big problem – the insatiable greed of the very few. As I mentioned elsewhere, on the basis of past actions I really cannot see America “going quietly into the night”, and I really think it’ll be a case of “Our way, or No-one survives” since the well connected “over there” are quite certain that they can ride out the nuclear holocaust in their five-star rated deep underground bunkers; the rest of us plebs be damned.
What, you mean these high-class twits are not having second thoughts given the recently demonstrated bunker-busting capabilities of Russian hardware? More than anything else, the message to me was that their fancy well-funded fundaments are on the same line as yours and mine. No wonder they’re howling mad.
My thoughts exactly .
Pepe has recognised what this new payment for gas is and that’s a good thing. It is not a silver bullet.
Keep is describing the long game like Michael Hudson is, which is also a good thing.
Many people need to calm down and realise we are a long way away from that outcome.
The starting gun has been fired what happens next only time will tell.
it’s more what happens to the US debt if more countrys will pay in other currencys as USD and avoid the USD System altogether. The US will very likely have to default and if that happens it’s over for the West.
This is it. This is essentially how the US wrested Reserve Currency status from the UK (and let’s not kid ourselves, that was the entire intention all the way).
The fact that the US (and its lackey EU) have already confiscated Russian assets (without Congressional declaration of war I note), might well be regarded as an act of war by some since the amounts were hardly insignificant.
Others have noticed this, and the uproar (e.g. on ZeroHedge) has been substantial. Countries who have the “privilege” of holding reserve currency status just do NOT do this sort of thing AT ALL. So, using US / EU Banking institutions to hold reserves has become a lot less attractive.
Time will tell how this pans out, however I suspect that the attraction of keeping your hard-earned cash out of the hands of the US will be very attractive for many of the “non-aligned” Nations out there, so in effect all of Zone B.
What are you really saying in your always convoluted and ridiculous assumptions & predictions that you often make? The complete joke that has become the west has stolen Russia’s money, as they did in so many countries, and now Russia has said that you pay us in rubles. What else do you need to know?
The Russians said you ain’t getting no gas period, for your ignorant hatred, and months previous. Months before, an ex- general from your great British army said that Russia can destroy Britain in a half-hour. But they soon took down his comment, just like MSM in America where something manages to squeeze through the lies. The Europeans can buy in rubles or the lot goes to Asia. Comprende?
Go and bully again the Arabs to flow more oil, and go back and beg Iran & Venezuela, of whom you stole their savings. To date, you can’t even get India to Join your coalition of evil. Further, you talk about China, as if it were a century ago when you piped them with opium, for which you will pay back.
There is a hard recokoning coming , and it is clear and your pseudo-economics is an illusion. Don’t go looking for China to bail out the crippling of European manufactures.
No, go to the Zion USA who are unable to fix their chaotic country.
My sense on it is that the ideological idiots running the political process can respond from their sense of “moral” offense and urgency in much worse ways than those that largely damage their own self-interest. There is already amazing and stupid rashness but it could be much worse.
By phasing the shocks, instead of piling them up, time is given for the smarter people in the discussion to point out the obvious and for some of this new reality to begin to be absorbed by those who are non-absorbent slow-learners and who cant bother to listen to a Putin speech.
You just may be a compete moron if you second guess Putin’s geostrategic decisions. Many have tried, all have failed.
It is a very good chess move. However, nothing is set in stone regarding gold-backed gas/oil trade. It is an important step for the time being, for all the countries suffering from the robbery and bondage of the West, Iran and Venezuela, to free themselves from the shackles.
The new digital currency will be written on Chinese paper.
Exactly Chris !
Phil, yes what you ” save in” and what your ” debt” is in is by far more important.
Getting off $ debt and off pegs with the $ is what countries should focus on. Becoming more sovereign so they can issue their own currencies.
“Russia had the option to switch off the taps. Stopped the offensive in Ukraine and went defensive to prolong the war as long as possible, saved lives and got the pop corn out and watched the EU turn on itself. As the EU is not as United as it says it is. They would have signed any peace agreement put in front of them in no time. Russia would have got everything it asked for.”
1. Russia still has the options to turn off the taps anytime — and now with another business reason included linked to Ruble payment etc.
2. Without rapid action in the breakaway republics the Ukraine forces would have likely swept through and could even have made Crimea the battlefield. Nato would have effectively moved up to the Russian border with boots on the ground.
3. Once the territories of the breakaway republics are secured then your “defensive to prolong the war” option can still apply if necessary.
4. Unfortunately, as we have seen since Russia moved west, that your “Russia would have got everything it asked for” would not have applied — e.g., de-Nazification (& demilitarisation).
Your basic premise is that the EU has agency. Not so it seems. This is the USA in an aggressive attack war mode on Russia via two proxy layers — a) Nato; and b) Ukraine.
Since the Biden gang was placed in power (read Obama 3.0) this has simply continued the criminal rot of the Ukraine-Russian region with the aim of transforming Russia into Ukraine. The conflict line is really a miss-match between a state with a government (Russia) and a mess of systemic and moral corruption (Oligarchy) that owns various governments. It is the Rule of Law verses the rule of gangland rules.
Ukraine is (and was) a failed state in anarchy. It has only survived with smoke and mirrors, IMF (& other) loans, selling their collective arses to whomever, and the transit gas fees (including stealing gas) etc.
It is more than likely that if it comes to a “defensive to prolong the war” scenario once the SE is cleaned out then Russia could quite easily turn off all taps except Nord Stream I & II. Then the EU buys their gas via the German gas network with payment in Rubles (or whatever once ‘friendly’ is re-established) and the Germans play the EU middleman and take their cut etc. The Turks have the south, the Germans the north.
There is a lot of spinning plates on sticks at the moment, but it’s not just Russia that wants a neutral Ukraine with the American criminal (Biden) gangs out. Western Ukraine could well be defanged, de-gassed, and left as a regional agricultural buffer zone.
The major long-term macro-economic game is clearly that the future EU economy has the option of a ‘win-win’ peace with Russia that gives them comparable source energy prices with China; or they will be left trying to compete internationally with China (& South & SE Asia) while operating on far more expensive source energy cost structures.
What gives? Productivity? Hardly any of that left in Woke-ville.
Labor costs? The most logical outcome.
In his seminal treatise on money, the economist John Kenneth Galbraith wrote, “The process by which banks create money is so simple that the mind is repelled when something so important is involved, a deeper mystery seems only decent.”
Banks create money ex nihilo as digital data entries on their computers.
It’s not difficult for any sovereign country to create their own money supply.
The only issue is for people to accept it in payment for goods or services rendered.
China has been creating its own domestic currency the yuan using its government owned central bank without going into debt to private banks to pay for all government expenditure. It does not need to borrow.
The US dollar is a actually a privatized currency created out of thin air as debt every time banks make a loan.
“The US dollar is a actually a privatized currency created out of thin air as debt every time banks make a loan”.
Thus there are two distinct layers of theft here. First, the banks create money and sell it at its face value, obtaining interest and demanding repayment – even from US customers. Second, the USA as a whole obtains vast amounts of valuable goods and services from the rest of the world, paying with worthless paper.
The Russians and Chinese have tolerated this for a long time, not wishing to inflict the terrible damage to other economies that ending it would entail.
Now they have had enough and are prepared to accept the consequences. Amusing that the USA itself should at last become collateral damage.
The collapse of the USD will plunge the world into a global economic crisis of unprecedented proportions. The US’s allies in Europe and Asia will have to bail out the US.
After Trump’s tax cuts and the pandemic spending, US debt/GDP ratio is at an all time high of 124%. Even during the wartime economy of WWII, US debt did not reach that level. Any further asymmetric shock is likely to push the economy over the edge.
To fund it’s double deficit (trade and budget), the US needs to attract large amounts of foreign investment. To do so, the US has to offer higher returns on investment than other markets. With inflation running at 8%, or perhaps even 10%, investors would lose money with an interest rate of below 8%. Having to jack up interests to that level risks strangling the economy. At a time of high inflation, that means STAGFLATION.
After many years of imprudent spending, the US doesn’t have any reserves to stand an asymmetric shock.
Exactly Kapricorn 4 !
Why Banks Pay Interest on Deposits
This is from the book Post-War Banking Policy – a series of Addresses published in 1928.
The Right Honourable Reginald McKenna P.C. was a former Chancellor of the Exchequer (1915-16) and ended up as Chairman of the Midland Bank in the 1920s
The quotes show that the way banks actually operate was known a century ago. Have been lied about ever since.
” I am afraid the ordinary citizen will not like to be told that the banks or the Bank of England can create or destroy money. We are in the habit of thinking of money as wealth, as indeed it is in the hands of the individual who owns it, wealth in the most liquid form, and we do not like to hear that some private institution can create it at pleasure. It conjures up a picture of an autocratic and irresponsible body which by some black art of its own contriving can increase or diminish wealth, and presumably make a great deal of profit in the process”
“Banks create money ex nihilo as digital data entries on their computers.”
They create a ‘credit’ based on their assessment of someones[Gov] promise to repay, then until spent they keep it, nominally in an account. If spent it becomes a ‘credit’ in perhaps their brothers bank or maybe their cousins but it spends very little of it’s ‘life’ out in the world, so little time that it can be leant out multiple times and even when loaned out remains mostly in a bank thus it can create an annual income stream, through usury, almost equivalent to it’s original total. Wholly dependent on artificially creating an endless need for credit by keeping people poor, plus you need five or more banks otherwise the scam is too obvious.
The Euros used to exchange for Rubles don’t physically travel from a buyer in country A (outside Russia) to Gazprom in Russia, it is merely a matter of change of ownership of an entry on a bank account. Instead of Russia getting ownership of Euros on a bank account inside a non-Russian jurisdiction where it can be confiscated and rendered worthless (as it did), Russia gets ownership of Rubles that were exchanged against Euros still owned by the buyer in country A on an account in Russia. The point being, that until the Rubles that have been bought change ownership, no gas will have been paid for and none will be delivered.
There is no reason for Russia to BUY rubles, they can now just CREATE them as a data entry on a Russian bank computer.
I doubt that those euros will stay static for long. They can immediately used to pay for trade with Turkey for example. Hell, if you want to play nasty, you can even use them to buy Qatar LNG in spot prices and squeeze the gas market more.
«Instead of Russia getting ownership of Euros on a bank account inside a non-Russian jurisdiction where it can be confiscated and rendered worthless (as it did), Russia gets ownership of Rubles that were exchanged against Euros still owned by the buyer in country A on an account in Russia.»
That is a better description than most, but “Russia gets ownership of Rubles” is a bit of a misdescription because the Russian Federation Central Bank “owns” all roubles :-).
I think it is clearer to most people if one uses “bonds”:
* Before April 1st EU importers of RF gas would pay in EU government “bonds”, and RF businesses cannot use EU government “bonds” to pay for their imports, because the EU governments refuse to “pay” those “bonds” because they are “sanctioned”, so EU government “bonds” accumulate in the RF without being able to be used.
* After April 1st, EU importers of RF gas must pay in RF government “bonds”, that they must buy in the EU itself. Then RF businesses can use RF government “bonds” to pay for imports, because exporters to the RF know that they can sell the RF government bonds in the EU to EU businesses that want to import RF gas. If the EU governments decide to “sanction” RF government bonds, then importers of RF gas cannot pay for the gas.
The very crucial detail is that while RF businesses cannot pay for imports in EU government “bonds”, after April 1st they can pay for them in RF government “bonds”, because purchases of RF gas create a demand for RF governments “bonds”.
The process which Pepe describes does agree with my understanding of international banking. I confess, I am no expert and my understanding could be wrong. Here is what I believe: All currencies exist in physical and electronic forms. 99% of all currencies are in an electronic form. Electronic currency exists only in the country of issue. I live in the UK and have a UK bank account with both Sterling and Euro deposits. My Euros are not however in the UK. My British bank has its own account with a European bank. My British bank may have a Euro account with many billions of Euros in it. This represents the total Euro deposits of all its customers, including me. If the EU impose banking sanctions on the British, then my British bank’s Euro deposits will be frozen. I will then have no access to my Euros. If this is correct then Pepe’s description does not make sense. How can Germans transfer Euros to Gasprom bank in Russia? There is no physical transfer of Euro notes and the electronic transfer is done in a German bank in Germany. In normal circumstances this would not be a problem since Gasprom could instruct its German bank to transfer its Euro anywhere it chose. It could, for example, transfer its Euros to the Russian Central bank. But even then these Euros never leave German jurisdiction. The Russian Central bank has its own account with a German bank in Germany. If Gasprom’s German Euro accounts are not frozen under EU sanctions, then all is fine and they can accept Euros as before. But if this is the case, then why mention payment in Rubles at all? If anyone can help clear my confusion I would be very grateful.
This is my understanding:
From now on, Gazprom (GP for short) does NOT use its Euro account in Germany. The German buyer needs to have a Euro account IN Russia. The Russian bank does the job of “converting” those Euros into Rubles and deposit the Rubles into GP account in Russia.
Now, if the EU decides to block the transfer from the German buyer’s account in Germany to its account in Russia, then no transfer = no gas. That blockade of the currency transfer only concerns the German buyer, not the seller (GP).
Dimitry Orlov put a translation of Putin’s decree. It says
“…A foreign buyer transfers funds to a special type “K” currency account in the foreign currency specified in the contract for the supply of natural gas, and the authorized bank, on the basis of the foreign buyer’s instruction received in the manner prescribed by the rules of the authorized bank, sells foreign currency, received from a foreign buyer to such an account, in organized trading conducted by the public joint-stock company “Moscow Exchange MICEX – RTS”, credits the proceeds in rubles to a special ruble type “K” account of this foreign buyer and transfers the credited funds in rubles to an open Russian supplier in an authorized bank ruble account.”
and this is Dmitry’s comment:
“This makes it clear. Deposit your worthless freshly printed fiat currency in the Russian bank and let that bank try to sell it on the internal market for rubles. If your own sanctions make your currency useless and there are no buyers, then no gas for you.”
I believe the key here is that the exchange Euro Ruble is to be made on international market (I believe Moscow Exchange MICEX – RTS is in Moscow but the trading is international). That will push up the demand for Rubles internationally. If there is not enough Rubles internationally, then less gas for you.
My 2 cents
I think you’re almost right. The bit I think u r missing is that the Russian Central bank creates new roubles and thus the demand for roubles.
What about a possible “clawback” or something similar AFTER Russian oil & gas payments were made ?
Like months or years later by simply differentiating — or directly invalidating or revoking — all THOSE Rubles payed in that specific manner etc etc etc “under Russian extorsive pressure” etc etc etc in violation of “OUR” rules-based payment system… so that we can confiscate them all over again…
As a matter of fact many “unfriendlies” have declared Ruble payments are “illegal”. Go figure.
I mean… after all the arbitrary, deceitfull and unforeseeable bag of many tricks the Western world has pulled on Russia for the last 30 some years… why wouldn´t EU members — or other of the many “unfriendlies” — tie devious strings to their Euros or Dollars AFTER supposedly having them paid already and being accepted by Russia in good faith ?
“Unfriendlies” have demonstrably cheated the system many many times as they own the BIS + UN + IMF + World Bank etc etc etc. Russia does not run or have the capability to intervene in any of the mechanics of the world´s financial centers anywhere, not London, not New York, not Chicago, not Zurich, none… which make and CHANGE the rules. Past examples abound.
…´…Germany and France rejected Vladimir Putin’s demand that foreign purchasers of Russian gas pay in roubles as an unacceptable breach of contract, adding that the manoeuvre amounted to “blackmail”…´…
The Russian government, wants to sell Russian gas, extracted from Russian soil, in Russia’s own currency…..this is blackmail!
These two Yank bootlicking toadies have got more front than a double-decker bus.
They should be thankful Russia is selling them anything at all.
Escobar does a good job of explaining the Ruble payment requirement. The Russians have set it up so contracts can still be paid according to original currency specifics, yet the israeloamerican nazis will not be able to steal. And as an added benefit, the process strengthens the Ruble on the international market. These people creating these payment requirements did their homework. :-D
This israeli/zionists are no doubt livid. :-D
“Saddam, Gaddafi, Iran, Venezuela – they all tried but couldn’t do it. But Russia is on a different level altogether.”
Yes. In order to successfully pull off a commodities based reserve currency like Russia is doing, you need to have the military muscle to back it up–which Russia does.
Thus, a major reason why America attacked Iraq and Libya is because they sought to free themselves from the US Dollar Dictatorship by pricing Iraqi oil in Euros or by developing the Libyan Gold Dinar as a currency for Africa. Similarly, Iran and Venezuela stopped selling their oil in US Dollars with the result that the USA has been intensifying its siege warfare against both nations.
In terms of the US Dollar Reserve Currency, its been stated that what really backs the US Dollar is the American war machine.
Even American Big Tech oligarch Peter Thiel admitted this reality–although he is being proven dead wrong about the Ruble as a replacement reserve currency:
The Dollar’s Strength Comes from the Barrel of a Gun – Peter Thiel
It’s amazing how few politicians understand/grasp simple economics and accounting. The dynamics of the transaction is about 8th grade level, my own daughter 12, can do far more complex problems.
Further, if you’re holding a Rouble Account with Gazprom/Russia then those Roubles can automatically be exchanged for Energy/Other Products in the future and have pride of place viewed on any company Balance Sheet under Current Assets . . . . . . at year end.
Real Assets (AAA+) unlike the for garbage paper assets you’ll find on the Balance Sheets of the Central Banks & Exchanges.
We’ve been asking for decades why the politician can not do his/her own taxes, I mean who needs to be represented by someone who cant even do their own taxes? Not me!
Yes, it’s a beautifully elegant counter to the West’s financial warfare, but we all should be very aware that ANY kind of nonrenewable-resource-related currency is not sustainable and can lead us into conflict over competition to control resources. The rublegas and the petrodollar are both based on the continued supply and extraction rate of a finite earth resource. So, any economic ride made on them is like any ride at the carnival, fun and maybe a little wild while it lasts but it does come to an end and you have to get off and find a new ride.
So, one wonders: How are the Russians doing on making sure they can keep a modern economy going post-fossil? How much time will they have left to get it done? Are they wisely investing the profits from selling off their remaining reserves of fossil fuels in the transition to next energy, or are they wasting a lot of those profits on trying to emulate the West’s consumerist economy? Is it possible that they are in danger of being effectively neo-colonized by selling-off the resource base that they themselves will need to make this transition? They are in fact going to be selling a huge amount of their reserves to China, and China desperately needs them to continue her own efforts to become a leading modern economy with heavy consumeristic spending as a big part of that, and also China must keep moving along as the world’s factory which means that in keeping China going, you are also keeping the West supplied with the stuff it no longer makes for itself, and also thereby helping to support the Western financialplex which depends on the controlling-owning the means of production of real goods made with fossil fuel energy. One way or another it would seem that Russia will be selling off a large portion of her share of earth resources to support the West, at least indirectly. If Russia wants to maintain her independence, she must prioritize the transition to an economy which not only needs no fossil fuels, but which also has no need for export revenues from them.
Avianthro, you make a good point about fossil fuels eventually running out, because they are a finite source.
But industry needs to have an energy source to make products like steel, aluminum and titanium used for machine manufacture. I think that it will have to be nuclear power, either by using fission of Uranium and Plutonium, or fusion of hydrogen if it can ever be achieved.
Who let the Peak Oil theorists out after the Shale Revolution proved their wild predictions were off by centuries? Long before Peak Oil ever becomes a real problem, Peak Rechargeable Battery (PRB) production will have occurred after the world’s supply of minerals to manufacture the new energy holy grail of rechargeable batteries will have long since been depleted. PRB will also leave the environment plagued with the mother of all toxic waste disposal waste problems with fleets of dead EVs and mountains of other dead rechargeable batteries to safely dispose.
Not so fast.
The Davos reset is not over yet.
It will simply be limited to five eyes and EU.
So we will get to live in Oceania, while the rest of the world continues to thrive cooperatively. Eurasia and Eastasia will never exist in the Orwell’s sense.
My understanding of what’s going on with the new ruble payment rules comes from the following link:
As has been discussed, the (European) gas buyer sets up two accounts, a euro account and a ruble account, and the supplier sets up a ruble account, all at Gazprombank.
Buyer deposits euros into euro account, which bank then converts to rubles using the Moscow Exchange MICEX [or MOEX], and the bank then deposits those rubles into the buyer’s ruble account. Lastly, the bank transfers those rubles from the buyer’s ruble account into the Russian supplier’s ruble account. Only then is payment considered made.
The idea is that this method prevents the ECB from freezing RCB (RU central bank) euro accounts. If the ECB freezes the buyer’s euro account at Gazprom bank before the currency exchange is made, the buyer will lose, not the Russian supplier. The ECB can only freeze euro accounts, not ruble accounts.
I do have some question as to who would be the buyer of the euros on the MICEX, I assume it’s not the RCB, or else these euros could be frozen again. MICEX [MOEX] is just an exchange, and presumably anyone can transact there.
(If something is wrong with this explanation, please inform).
I think your explanation is correct. That’s how I understand it. I believe MICEX is based in Moscow but it trades internationally. And if there is not enough seller of Rubles to buy Euros, then Gasprom will receive less Rubles, and will deliver less gas
«the bank transfers those rubles from the buyer’s ruble account into the Russian supplier’s ruble account. Only then is payment considered made. The idea is that this method prevents the ECB from freezing RCB (RU central bank) euro accounts. If the ECB freezes the buyer’s euro account at Gazprom bank before the currency exchange is made, the buyer will lose, not the Russian supplier. The ECB can only freeze euro accounts, not ruble accounts.»
This is better than the gross misunderstandings that are common in the article and the other comments, but it still omits some very important aspects, I’ll try to explain better:
* We are not talking indeed about euro banknotes, but euro accounts.
* All euro accounts are a credit against the ECB or an ECB-licensed bank in the EU; euros are ECB debts.
* If there is an euro-denominated account in a russian bank that is because the russian bank has a credit for the same amount against the ECB or an ECB-licensed bank in the EU. It helps to think of euros in a foreign account as euro-denominated bonds.
* The ECB can simply therefore refuse to process any euro-denominated transaction, thus in effect refusing to pay its bonds if they come from Russia.
* The value of a currency is its ability to be used to pay for purchases. Who is going to accept as payment a transfer of euros from a russian bank, when the ECB is going to refuse to credit it to the payee?
* So if russian businesses, including Gazprom, accept euros as payment for their exports, russian businesses cannot use euros to pay for imports, because the ECB will not pay ECB debts to russian entities.
* But if russian businesses, including Gazprom, are paid in roubles for their exports, then they can use roubles to pay for imports, because there is international demand for roubles because they must be purchased by Gazprom customers to get deliveries.
* Since there is international demand for roubles to pay for russian exports, non-russian businesses can accept roubles in payment for their exports to Russia, because they can easily convert those roubles into euros.
* The crucial detail is that then the rouble-to-euro conversion is done not in Russia but in the EU, in a bank that is not sanctioned by the ECB, by the exporter of goods to Russia. To stop that the ECB should then forbid rouble-to-euro conversions, but then EU business would have no way to pay for russian gas.
Basically the Russian Federation government is telling both importers of stuff from Russia and exporters of stuff to Russia to process their payments via the Russian Central Bank in roubles, rather than via the ECB in euros, and to do the euro-to/from-rouble conversions in the EU rather than in Russia, so instead of russian banks having credits to the ECB in euros, it is EU banks that have credits to the RCB in roubles.
@Blissex. Thanks, that elaboration was helpful.
The problem is that the EU can grab the euros in the unsanctioned EU bank as is being done with the frozen Russian Euro accounts:
“European Commissioner for Justice Didier Reynder has authorized the transfer of the Russian Federation’s “frozen” assets to Ukraine in compensation for the “unilateral” attack perpetrated against her.
In addition, EU services are trying to substantiate the involvement of Russian oligarchs in the current war so that their frozen assets can also be seized and turned over to Ukraine.”
EU authorizes transfer of seized Russian assets to Ukraine
Who buys the Euros on the Moscow exchange? With what rouble instruments do they buy the Euros? What does the Russian central bank do with Euros they are left holding? To create money banks create credits such as loans or central banks and governments sell bonds. Does the Russian govt. issue bonds which are bought by gazprom bank with Euros? Again the Russian central bank is left holding Euros. The rouble rupee trade is facilitated by the ability of Russian banks to purchase rupees via the purchase of Indian corporate bonds. Its not as simple as Pepe makes it appear.
What Russia is doing is a journey to try and internationalizing the Ruble or making the Ruble a reserve currency for many nations/companies.
Basically say you are a Eurozone company that wants to buy gas from Russia. You have Euros. At the moment – because as per Russia, it is still abiding by the contracts (the West disagrees) – you deposit the Euros in Gazprombank. It is up to Gazprombank to sell the Euros into Rubles which are then transferred back to the Euro company to then transfer to Gazprom so it can supply gas.
The key is here is that it is not the Russian Central Bank’s responsibility to store/sell the Euros. So where does Gazprombank find buyers for Euros?
Russians don’t want Euros (or hardly any). But say India might have Rubles to sell for Euros since India can use the Euros to buy stuff from Europe or elsewhere that accepts Euros.
Where does India get the Rubles? By selling say Pharmaceuticals to Russia which Russia can pay in Rubles.
So India would build up a Ruble reserve to buy $/Euros with.
The ultimate step would be for Russia to tell the West: if you want Russian commodities (oil/gas/coal/wheat/metals/wood), pay for it directly in Rubles. So the West would have to figure out how to sell their $/Euros/Pounds/Yen to countries who actively trade with Russia for Rubles and potentially build up Ruble reserves to manage risk.
So as this progresses, as far Russia is concerned, it can simply sell and buy goods and services in Rubles and let others worry about how to acquire them (either by selling their currency or by direct trade with Russia). This is precisely what the West does since other countries assume the risk of holding their currencies.
Russia at this point has no choice but to sell its goods in Rubles (or non Western currencies) because Western goods are increasingly blocked from sale so holding $/Euros etc is useless other than to sell it to someone other countries for Rubles, a risk which Russia may decide is not worth taking. Let the buyers figure out how to get Rubles.
“Russians don’t want Euros (or hardly any). But say India might have Rubles to sell for Euros since India can use the Euros to buy stuff from Europe or elsewhere that accepts Euros.”
As it stands now, India too would be sanctioned for doing this.
I’ve seen no reports that Ruble trading is banned. China itself had announced it has not ruled out trading in Rubles/Yuan.
At the end, the issue is quickly becoming this: Russia won’t want to accept or store Euros (except to quickly trade them out for Rubles) because they are near worthless because there are restrictions on using Euros to buy goods. The West doesn’t deal with Rubles (except to quickly trade them for gas).
Somebody needs to then facilitate the trade of Euros to Rubles and back. Those somebody’s have to be outside both Russia and the West who trade with both and for whom both Euros and Rubles have value. These are basically Asian, African, Latin American countries (apart from some countries like Serbia in Europe).
Selling Indian Pharma/textiles etc or Chinese manufactured goods to Russia doesn’t violate the primary sanctions regime let alone the secondary ones that the West has imposed (and which incidentally lies outside International Law where only the UN can impose sanctions everyone ought to follow eg like the ones on DPRK)
If Euro/Ruble exchange is somehow totally banned then Russia cannot get exchange commodities with the West for Rubles and that flow would fall to zero. Russia will continue to trade in Rubles/Rupees/Yuan/Lira etc with those countries who still desire to/are able to.
Venezuela needs to team up with Russia on this ruble idea.
They’re a bit of a problem child in some ways, and more naturally CNY oriented, but under the current circumstances North Korea might be interested in a ruble zone too.
Venezuela 28 million
Iran 84 million
North Korea 26 million
Total 138,000,000 people, almost as much as the RF (and then there’s India and China)
Iran’s weight and the fact that it’s strategically located counts far more than just the population or the size of the economy. In some ways it’s the mother of all currency switching. However, Tehran must be serious regarding what policies it’s going to undertake rather than just short term opportunistic maneuvers playing East vs. West things, like what some people shout during demonstrations across Iran since the 1979 Revolution saying: neither the West nor the East, only I.R. Iran. In other words they need to reeducate and improve their understanding of what’s happening in the international arena.
Wasn’t it the Eurocentric-inbred-pansified-numbnuts of the past that believed the world was flat? Even though Ancient Sumer knew the world was round. Sometimes, genetic defects can’t be fixed.
That sloshing sound you hear is the Petrodollar circling the drain.
“Germany mulls nationalizing Gazprom and Rosneft branches”
The reason behind this supposedly ´unexpected´ idea is “[Germany has] concerns over energy security amid anti-Russia sanctions and Moscow’s demand for gas payments in rubles”
Unimaginable ? Really ??
Where would this leave GazpromBank and Ruble transactions ?
Say no more…
German business daily Handelsblatt stated that discussions on the matter have been held between senior Economy Ministry officials and Chancellor Olaf Scholz.
“Gazprom offices raided and searched in Germany”
Gazprom was accused of “abuse of power,” with EU officials claiming it deliberately reduced supplies
What if Gazprom is accused of “treason” now or “willfull intent” to hurt the EU economy and gets another set of NEWER sanctions blah blah blah.
The EU won´t bite the bullet, will it ?
Russia´s Foreign Minister Sergei Lavrov has defined the EU as “contract-incapable”… and let´s add unworthy
Meanwhile, Gazprom announced on Friday that it is ending its participation in its Gazprom Germania subsidiary, and divesting of all its assets in the company.
…´…this means Gazprom is drawing a curtain on being an active participant in the European gas market. Essentially it is going home because it no longer feels welcome…´…Gazprom understands it is going to face a hostile political and regulatory environment in Europe and therefore wants to consolidate and conduct all of its business in one place – St Petersburg, most likely with the political support of the Russian government…´
…´…Gazprom has stopped deliveries of Russian gas to Germany via the Yamal-Europe pipeline, and today the volumes began to flow in the opposite direction, according to network operator Gascade…´…
Where does this leave GazpromBank ?
…´….Germany Could Nationalize Parts Of Russian Oil And Gas Giants…´…over concerns the companies that are systemically important for the German energy market could run into financial troubles…´…
“Germany fears a shortage of energy supply if those two companies run into difficulties or become technically insolvent as banks are shying away from funding firms connected to Russia”….
At first glance, it does seem to be an absurdly simple Forex, currency exchange, between Euros, and Rubles, and yet it is not, as the transfer is between fiat currencies, with no intrinsic measure, created from nothing, by central banks. We may as well be talking about shadows, in Plato’s Cave of Usury!
My attempt to understand is that when the Euros reach the Russian bank, they are converted into Rubles, to allow the gas exchange. The bank is not left holding Euros as they have morphed into Rubles. Rubles have appeared, and Euros have disappeared, the Ruble has become stronger, and the Euro weaker.
However, with fiat currencies, there is nothing to stop the EU saying to the gas buyers, simply deposit your Euro purchases with us, and we will issue an equal amount of Euros, from Nothing, and pay Russia for their gas. Those Euros will disappear in the exchange, and we will get Russia’s gas for free!
Alternatively, Russia can take the Euros issued to the Russian bank, in payment for the gas, and create an equal value of Rubles, from Nothing, to complete the gas exchange. The Euro notes can now be returned to Europe, in a demand for gold. In this transaction, Russia gets the European gold for free!
When there is no trust between nations, the transactions are difficult, but at least we can now understand the US dollars ‘exorbitant privilege’, for the past seventy years! All the nations of our world have had to sell their treasures, in exchange for US dollars, and the US is the only nation allowed to create greenbacks. ‘Money for nothing, and chicks for free’, to quote Dire Straits!
Perhaps this is where Russia’s 5000 Rubles link, to one gram of gold, comes in. Deliver the gold, and we issue Rubles, with the Russia/Euro market balancing out all the individual trades, to create national settlements, with the final differentials settled in gold? A contract, by nature, must be an exchange in value, not an exchange in fraud!
“Those Euros will disappear in the exchange, and we will get Russia’s gas for free!”
Not so. Russia simply uses the Euros to pay other countries for goods and services. In due course those other countries will use the Euros, and in the end they will remain in circulation as demands on the EU.
Exactly the same trick that the USA has played with the dollar since 1971.
All Euros are created as debt ex nihilo by European banks every time they make a loan.
As the principal of the debts is repaid the banks must delete it back out of existence, otherwise there would be massive inflation, but they get to keep the interest, that must also be created as debt.
In the US and Euro zone:
no debts = no money
Germany seems to think that it can steal Russia’s national reserves, shut down the Euro trading mechanism, seize all Russian assets, including those of Russian citizens, and yet Russia is still bound by economic law, to fulfill their gas contracts!
The term German ‘village idiot’ rises to the surface of the mind.
How many cold nights, does it take in Bavaria, with no fertiliser to grow crops, before Germany reconsiders its economic position?
Fertilisers are overused anyway.
Hope this crisis will bring fertiliser use down to sensible levels.
One good aspect of this crisis.
“Dorftrottel” seems to me a good word for the present Chancellor. Up till now I accepted some commentators description of the man as a “Holzkopf” but his present ideas seem to originate from something even less useful than a wooden head.
Russia and Putin are our only hope of a better future for people on this planet. It would be difficult to imagine either China or Iran could have the wherewithal to do what Russia is capable of doing today. Wish them great success. In the case of the other big player i.e. Brazil and its former president, Lula, one remembers what could go wrong.
I am not so certain. Escobar speaks triumphally, as it was “thing done”. Far from it. The Nato mafia empire is not going to pay in rubles. Period. They are the masters. Everybody must enrich them, but not the other way round. I most likely see a near future (2 – 3) years of deliberate and ruthless sacking of Europe by the anglosionist pirates, together with a significant contraction and redesign from scratch of the Russian economy. For Russia, this is a new dawn. For Europe, this will be a long glommy painful dusk which will entail the definite decline of both US and UK, because, contrary to the supposed autonomy of the maritime empire, it can not survive without parasiting Europe.
“Saddam, Gaddafi, Iran, Venezuela – they all tried but couldn’t do it. But Russia is on a different level altogether.”
On an entirely different Level. NAZO so far has only gone to war against much smaller and weaker opponents.
“No one can resist our armed might” — British Minister boasting after NATZO beat up Serbia.
NATZO and the rest of the U$ Army are what gave strength to the “almighty” U$ Dollar and its sidekick the Euro. But now there are 2 other big players in town, the Ruble and the Yuan.
“Justice comes from the barrel of a gun” — Mao
Wait till the Russian Central Bank “demands” EUROS and GREENBACKS be used to buy PHYSICAL GOLD for delivery to them before crediting RUBLES at an agreed rate in a Russian Bank for payment of the oil and gas. Then we will really see fireworks!
It seems to me that Russia had to concede that payments could continue to be made in $ and €. The only difference is that these can no longer be frozen or even confiscated since they are paid into a Russian bank not subject to sanctions. So there are no ruble payments from hostile countries.
@Emile: “So there are no ruble payments from hostile countries.”
Exactly; hostile countries pay in EU$A currency exactly as before. So why are the EU$A Klepto-rats squealing?
The only difference, they now pay into a Russian bank: so the EU$A Kleptocrats can no longer steal their money back or “freeze” it into a virtual nonpayment.
Emile, yes…and NO.
You correctly say ” The only difference is that these can no longer be frozen or even confiscated since they are paid into a Russian bank not subject to sanctions ”
Well, “not subject to sanctions” so far, today.
Hmmm… and what about tomorrow, or next week or next year ?
“Unfriendlies” have simply proven that they cannot be trusted.
“Unfriendlies” firmly believe their God-given right to be Rule Makers of the World NOT Rule Takers
Sooner or later this new Euros-for-Rubles “banking gimmick” will be cheated, as always.
The US, the UK, and their bankers, for the first time in centuries, have neither the weapons, nor the gold.
It will take the cunning of rats, if they are to recover their power, within our modern world!
Exactly, Ric! You have summed the position up with devastating concision. Thanks!
They don’t even have superior know-how any more.
Only euros in cash can exist outside of euro zone banking system. In other words an euro account in a bank in Russia has to be connected to a euro zone bank.
Ever heard of the Boiling Frog ?
Putting a frog in cold water, slowly turning up the heat, the frog will not notice and is cooked.
Put a frog into boiling water and he immediately jumps out.
As Glazyev says things can be changed in n a matter of days. Frogs are jumping!
China diplomatically reminded the EU yesterday that to avoid landing in hot water again it should have a policy independent from the USA.
Will Macron jump? Or be a grenouille?
Has Gazprom halted gas deliveries via the Yamal pipeline or hasn’t it?
I read it on Zerohedge yesterday but no other news outlet seems to confirm it.
Any confirmation, anybody?
PS – I would have expected VVP to give them around 3 more days, with renewed warnings, to grasp the seriousness of the situation, then to cut off supplies. Would be better from a PR viewpoint “see, I told you so, repeatedly – you had every chance”
ZH actually said the Yamal gas flow was reversed, not stopped. This happens all the time.
The really nutty thing is certain countries buying from Germany, reveerse flow, instead of buying from Russia.
This game could go even nuttier if Germany refuses to buy direct from Russia – Hungary? – could make a nice profit.
“Russian gas giant Gazprom has officially halted all deliveries to Europe via the Yamal-Europe pipeline, a critical artery for European energy supplies.”
Note: “halted” and “officially”.
That should definitely not be something that happens all the time.
“Instead of flowing toward Germany and the EU, gas supplies on Friday and Saturday started flowing in the opposite direction, according to Gascade, the network operator.”
Flow reversal. ZH.
Let’s agree that it is unclear and contradictory.
I consider it a “duck”
I was watching reversals all last year – really weird. At one point Poland was buying Russian gas from Germany, and totally against NS2. Looks like some pipelines are duplex, that requires pump station support. (was up to my ears in this , mostly Caspian and North Sea).
American government is theives, liars, murders. Right now they’re to me all three bit especially theives. My little investment in Gazprom is basically worthless. My shares I bought through td ameritrade are stuck at 1.10 and frozen. Where is freedom and democracy for little peoole like me? Where is this freedom and democracy American government speaks of?
A comfort is getting to see America and western Europe crumble. No not a feeling of revenge, but of hope. Collapse and crumble so may by the grace of God something new and better can rise. Truth and righteousness may prevail.
My only hope or feeling of revenge is not actually revenge but justice. May those responsible be held accountable. May they not get to flee to their so called promised land after or before all hell breaks lose.
Christ spoke on the cross Father forgive them for they know not what they do. The Romans may not have but tne otner did. And what they’ve done over centuries tney not only knew but planned and carried out. Their end is known, it is written. They must be feeling dread and helplessness. God’s will be done on earth as in heaven.
Sorry, this is pilitical Kabuki theatre and called “Zweckoptimismus” in German. The EU gas buyers do NOT pay in Ruble since the conversion takes place only on some Russian account. Meaning buyers of Russian resources do not have to seek Ruble on the “free market”, thus this “Ruble payment” does not have an external effect and does not elevate the Ruble to any new level.
Same with the military operation in Ukraine. Yes, the Russian armed forces never intended to take Kiev – clear. But this regrouping story is also nonsense. The whole foreray towards Kiev was pointless or ill thought out and of course the pull back is painted as defeat. Which it is not tactically but certainly operationally and strategically. So do not try to paint it differently.
Which brings me to the everlasting story of the Donbass “cauldron”. Which clearly does not exist and never did. Whatever VDV could do, they are not used accordingly to their design and abilities. The bridges across the Dnjepr are still open for the Ukrainians and their supplies are flowing, which is a fundamental operational failure of the Russian forces.
And it continues with Odessa. The port is still open, the city is no surrounded, the highway to Kiev is still open. Not even Izmail is taken. The border to Transnistria is not taken. Etc etc etc. Talking about border not taken: Even not all the Ukrainian – Russian border has been taken.
Already during the Cold War the Marxists in the West suffered from cartoonish glorification of the Soviet Union. And it continues with Russia. Don’t get me wrong – I love Russia, I lived there for seven years, still have a very nice apartment on Frunzenskaya Embarkment. But this whitewash of fundamental Russian failures happening here is more than questionable.
Your comments are not very nice and I do not like them. You question Russia and President Putin with your obvious limited knowledge. Who, who sir has accomplished so much against the West and America???? Who, is it you? I’ll tell you who, Russia and their President Vladimir Putin. Yes by the Grace of God, the favor of God, Russia by the righteous leadership of theirr President Vladimir Putin tbey are prevailing against the filth, corruption and abuse of America. Have faith, believe truth a d righteousness will prevail. God bless.
That nothing has changed on the surface for the buyer is true.
Yet the purchase IS done in rubles. And if the nice and friendly mechanism of euro to rubles is disrupted, then ALL the the trouble is on the buyer’s side, up to him to get another way to acquire rubles.
The change is indeed tectonic, deep under the surface, but very powerful.
And the ruble is strenghtened (it can be seen by everybody, which other country under economic warfare had its currency retained it’s exchange rate?). As rubles are in big demand.
And it is just the beginning.
Wait until other exportations switch to rube too.
Or/and when other countries open Russian bank accounts and offer exportations in rubles too.
At some point, the demand of the ruble will be higher than the demand of the euro on word market, then EU would need to acquire part of their needed rubles through another mechanism, the Russian banks will put quotas and only exchange euro for ruble at amounts for which they can trade back the euros…
Kiev Defense Minister said clearly the Ukrainian military infrastructure is completely destroyed.
That means no food, fuel, ammunition, repair shops, barracks, airports, aircraft, ships, all kinds of mobile hardware, no logistics, transport.
Who cares if a highway is open – let refugees move. UA is forced to hitch rides in buses, RedCross ambulances (war crime), steal food. Any mercenaries arriving greet Mr. Iskander and Mr Kalibr.
Azov was flashed into all UA brigades, that is the problem. Chechnyan units know their game.
This is modern warfare, and the war is over for them. Negotiations now rule.
Closing the door after the horse has bolted. Russia should have done this for all its exports decades ago and not held any of its foreign reserves in Werstern banks with the risk that it could be frozen at any time. Incompetence.
No one in the World is compelled to hold Rubles in order to pay for Russian exports. The exchange into Rubles will occur within Russia so, as a net exporter, it will still accumulate foreign currency.
Fred a d your comment isn’t very nice. What is with people being critical of Russia? It’s not very helpful. Say something positive. Unless there was some real something to speak out agaist but just opinion in disagreement thats not helpful.
The other day I went into a pizza shop, ordered two slices and a sub. He news was on and the talk was of course Ukraine and Russia. The one person working behind the counter said glory to Ukraine. I thought you ignorant dumbass. I didn’t say it. When he died my order I said, i say glory to Russia and walked out. No stop tnere no more. Heck if you’re going to critics Russia then you ought to go to pizza shop tnat says glory to ukraine.
That was likely Chubais, just jumped ship.
Germany is being handheld through the Kubler-Ross Stages of Grief. Rublegas or go full literal habitation in Plato’s cave. (thanks to Hal Turner)
Gazrom Germania is no longer a subsidiary of Gazprom. This had been conduit of gas contracts into Germany. Wikipedia notes it is now defunct and spoken of in past tense. It should soon enter bankruptcy proceedings. The beauty of the concept of corporations and corporate law.. two can play that game. If Germany wishes further gas, it will henceforth deal directly with the mother company in Russia, not local heist-able cutouts or under jurisdiction of EU law..
“The Gazprom Group has ceased participation in the German Gazprom Germania GmbH and all its assets, including Gazprom Marketing & Trading Ltd, Gazprom said .
“On March 31, the Gazprom group ceased its participation in the German company Gazprom Germania GmbH and all its assets, including Gazprom Marketing & Trading Ltd,” the company’s official Telegram channel notes ”
German Economics Minister Habeck wanted to nationalize (steal) Gazrpom/Rosneft assets. Looks like that is a gone bunny.
Russia is not respected by the West because it stupidly allows the abuse heaped upon it. Russia knew for months if not years it would need to act in Ukraine yet it left 100’s of billions of dollars of it’s wealth in the hands of those that want to destroy it. It allowed CIA controlled NGO’s, fake news/narrative organizations and fifth columnists to flourish. It allowed colored revolutions on it’s borders. Now like an abused wife it’s finally had enough and is fighting back but that don’t make it a man just an angry woman that forgot her place, in the thinking of the globalists.
Russia waited as long as possible. Why? Because the signs of US military and economic capacity/resourcefulness gradually decayed. It is an extremely wise kind of thinking to wait until the right time is ripe and not to act too early. As Russian’s president is a judoka as well as chess player no wonder. If you look at West’s statesmen/-women what will you find? Arrogance at the foremost as well as thieves on a great strechted scale.
I do hope the time was right.
“Now like an abused wife it’s finally had enough and is fighting back but that don’t make it a man just an angry woman”…..
Hell hath no fury like a woman scorned.
NATOstan Operation Slow-motion Barbarossa II meets Operation Slow Bear-Hug, and bears really do like to keep on huggin’!
Looks like the EU has stolen the frozen Russian euros in EU banks transferred them to Ukraine! Will Russia shut off all gas flows to the EU until the frozen assets are given back to Russia?
“European Commissioner for Justice Didier Reynder has authorized the transfer of the Russian Federation’s “frozen” assets to Ukraine in compensation for the “unilateral” attack perpetrated against her.
In addition, EU services are trying to substantiate the involvement of Russian oligarchs in the current war so that their frozen assets can also be seized and turned over to Ukraine.”
Must read, something from the best by the world’s top economist Sergey Glazyev. Is in German, but easily translatable.
Sergey Glazyev on the end of dollar rule, a new world currency and World War III.
Here already in English :
«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.»
That’s unfortunately a big misunderstanding of how “bookkeeping” currency works: sure, dollar banknotes in Russia are safe from confiscation by the USA governments, but dollars in a russian bank account are worthless unless they are processed by the Federal Reserve. Ultimately all dollars flow through USA banks and the Federal Reserve. If it were not like that then any foreign bank could simply issue dollars to themselves, by typing in some extra zeroes. What prevents a non-USA bank from editing the balance of a $1 account to make it a $1 billion account? Federal Reserve supervision does not apply abroad.
As I wrote in other comments, regard euro account balances as EU government “bonds”, and rouble account balances as RF government “bonds”, and hopefully things will be a lot clearer.
I fully agree with you!
Alasdair Macleod is saying that Russia has accumulated 12,000 tons of gold. Officially, Russia has so far declared only 2,300 tons. China and Russia combined have more that 30,000 tons, according to Macleod.
This will have a major impact on future talks regarding the global monetary system. Also, this supports the move made by Russia to sell its resources in local currencies and bypass Euros and US dollar.
US doesn’t have any other option but attack militarily Russia and China. On conventional grounds, US doesn’t have the capabilities to do it. The nuclear option is an option, but they will have to strike first and hope for the best…
Ukraine is part of the picture at this time. However, the conflict will soon expand in Poland, Germany and Denmark as they might refuse to buy rubbles for their imports from Russia. Denmark has already made that decision. Poland should be the next in line, with Germany following soon.
The Biden administration started this process and will end up paying for it. The US society will get serious inflation through the US dollar depreciation and reduced role in global markets.
“China and Russia combined have more that 30,000 tons, according to Macleod.”
I wonder if Russia and China could use their reserves to bail out the US if it had to default due to a high debt burden. As a condition for bailing out the US, they could impose reforms for restraining US oligarchs and curtailing the defense budget while increasing social spending.
“I have a dream”
The system set up is simple and prevents countries using the Euro or Dollar to basically steal more commodities from Russia. Personally I do not blame Putin and Russia for doing this and I think the Western countries did not think of the repercussions’.
I am not a Putin or Russian fan but our media is basically frothing at the mouth like a rabid dog, doing their best to destroy Russia. Thewy are lying to us the people and most are nothing but mindless lemming following them over the cliff.
Things are fixin to get hot !!! Oh crap I meant Freezing lol.
What we have to come to understand is that money functions as a contract, but we have come to see it as a commodity in itself. The medium has become the message. The tool has become the god.
Econ 101 says it is both medium of exchange and store of value, yet a medium is dynamic, while a store is static. Blood is a medium, fat is a store. Roads are a medium, parking lots are a store. The hallway is a medium, the hall closet is a store. Given the average five year old can figure that out, it just goes to show delusional the system has become. The functionality of money is its fungibility. We own it like we own the section of road we are using, or the air and water flowing through our bodies. It is the quintessential public utility, like roads, not private property. It’s not our picture on it, we don’t hold the copyrights and are not responsible for its value, like a personal check.
Storing the asset requires generating the debt to back it, which creates a centripetal effect, as positive feedback pulls the asset tot he center and negative feedback pushes the debt to the edges. Given the Ancients devised debt jubilees to reset this process, it goes to the core of finance.
The secret sauce of modern capitalism is public debt backing private wealth. The financial markets could not function, without the government siphoning up trillions in surplus investment money. Which makes the military industrial complex the trophy wife of the banks. She get all the toys and wars she wants and no one gets to point out she’s clueless about this whole geostrategy thingie, because the politicians are just hired to bend over, not actually think.
As the executive and regulatory function, government is analogous to the central nervous system, while money and banking are similar to blood and the circulation system.
While private government is no longer a thing, the system of democracy enables the power to go to the banks, as politicians cannot think beyond the next election cycle. Eventually our age will be seen as the banks having their own, “Let them eat cake.” moment.
After Ramadan, next up Crude Oil & we know where that takes us.
Germany, I’ve got an idea, why not open up Nordstream II.
They could set the Reichstag on fire again, that’ll warm them up for a bit.
Slovak Economy Minister Says Country Will Pay in Rubles for Russian Gas
“Gas supplies cannot be stopped. That’s why I say, although this may be too pragmatic for some. If there is a condition to pay [for Russian gas] in rubles, then we’ll pay in rubles”, Economy Minister Richard Sulik said on TV.”
From Sputnik live updates.
Agrees. Best quote and indication of where things are going –
Sergey Glazyev: “We are in the process of drafting an international treaty to introduce a new world accounting currency pegged to the national currencies of the participating countries and to commodities that determine the real value.
We will not need American and European banks. In the world where banks are losing their importance, a new payment system based on modern digital technology with blockchain is developing.
Classical capitalism, based on private banks, is a thing of the past. International law is restored.”
The West intoxicated with ‘Americanism’ and thus unable to think for itself. We need to wake up a lot faster…
I wonder if it’ll be better for Russia if they can renegotiate those long-term gas and oil contracts. If this rublegas really catches on, the ruble may end up getting even (much?) stronger against the dollar and the euro, which would hurt all russian exports, including oil and gas. Besides, if the cost of extracting, processing and transporting gas is mostly in ruble (I have no idea whether it is or not), it means Russia would be making less profits.
I’m sure Russia is aware of this, and of course there will be fierce opposition from the West to this, but a stronger ruble would be a delight to see in face of all the sanctions. It’d be even better if the scam that the dollar, euro and yen are were exposed for all to see.
Due to the crisis, the price for fossil fuels, basic food stuffs, fertilizers and other commodities exported by Russia has already increased substantially. If the sanctions help Russia to get out of its long term contracts so as to sell on the spot market, it will make huge profits.
If Europe/the US stop importing these commodities from Russia, they will have to get them elsewhere. For example, instead of supplying oil to China, the Saudis could send it to Europe while Russian oil goes to China. In other words, the total amount on the global market won’t change. Western customers will just have to pay more than others.
What an elaborate way of shooting yourself in the foot!
Qatar could even buy Russian gas, add freedom molecules and then sell it to Europe for twice the price. Everybody will be happy except for European customers.
OK, I’ve read an article in ZeroHedge that made me think a bit more on this subject of a strong ruble:
The article says: “By offering to buy gold from Russian banks at a fixed price of 5000 rubles per gram, the Bank of Russia has both linked the ruble to gold and, since gold trades in US dollars, set a floor price for the ruble in terms of the US dollar.”
That means the Ruble can’t get stronger than about 80.5 rubles for a dollar at recent gold prices (the reasoning is explained in the article). It’s easy to see why. Suppose the ruble gets stronger to a point where 50 rubles buy one dollar. Then, someone could buy a gram of gold in the West for about 60 dollars, go to Russia, sell it for 5000 rubles to the government, and convert it back to 100 dollars, getting a profit of 40 dollars. Now, this is a zero-sum game, so somebody would have to be paying for these extra dollars. Now, the easy answer would be that the russian government is paying for those 40 dollars, and that may sound correct. To do that, the russian government would have to be buying ruble and selling dollars (or euros, doesn’t matter), which would weaken the ruble. This is a negative feedback cycle, and would converge to a stable equilibrium, which would be that exchange rate of 80.5 rubles/dollar. So, there will be no risk of the ruble getting too strong and hurting the export of oil/gas. Neat.
Dollars in a Gazprom bank account in Russia are just as vulnerable as dollars in a Gazprom account in Europe or the US. The US shut the RCB and most other banks in Russia out of SWIFT. It seized RCB dollar reserves. Apparently the US is not seizing/freezing dollars held by some Russian banks (Gazprom?) in order to facilitate payment. Gazprom can then sell the dollars it receives for roubles on the international market through the Russian stock exchange. The buyer will not be the RCB whose dollar assets are frozen. It will likely be a private buyer/speculator who is selling roubles and has access to an unfrozen dollar-holding bank account. Note that every dollar in every bank in the world actually resides at the US Fed. There are zero dollars outside the Fed system except cash. When a dollar is held by ANY bank, it is actually in that bank’s account at the Fed. Thus any dollar in any bank can be seized by the US at any time. As for The “inimitable” Andrei Martyanov “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.” What is missing from this little gem is “Only two things define the world: WHO CONTROLS the actual physical economy and military…etc” What government, entity, institution, individual, CONTROLS these things is determined by the structure of the system and the rules which govern it. What we have is a battle over what that system will look like.
What can it be? Flacking for degenerate war criminals while focusing on currency? Oh Pepe! It must be a headache for you!
Reading the comments here (and elsewhere on the subject of gas for rubles) I would like to point out that there is a serious misconception making the rounds. This is the notion that by gas payments being made to Gasprom bank in euros ( which are then converted to rubles) somehow are immune from sanctions. The Euros that Gazprom bank receives can be sanctioned at will by the authorities in Europe. They are not physical holdings of euros but a simple balance sheet ledger which credits Gazprom bank which “x”number of euros. If Gazprom bank does not divest of those euros, they could be the subject of further sanctions (confiscation) down the road. How? Well should new sanctions be applied to Gazprom bank, it’s assets will be simply unacceptable by decree. Think of it as if Gazprom bank’s checks will not be acceptable – because that’s really what most euros (and dollars) really are aside from the physical cash. So the notion that the euros received from the sale of gas are immunized from sanctions is definitely wrong.
Like clawbacking or revoking payments already made by just saying that as from May 1, 2022 we paid Gazprombank xxyyzz amount of euros which we hereby declare to be invalid because because etc etc
“It´s the bloody gold, stupid”
Please check out this spanking new The Saker piece re “NATO´s internal gold war” at
oneruble should be 100 us dollars !