Countries who are “unfriendly” to Russian President Vladimir Putin, must pay for the purchases they make, using only rubles.
Countries purchasing any natural gas from Putin, are not allowed to pay in dollars or euros – dealing a blow to the petrodollar.
Russia has had international sanctions put on Russia’s Central Bank, including the removal of the banking payment system, SWIFT.
The Russian President said that, “compromised” currencies, will no longer be accepted – during a cabinet meeting in Moscow on Wednesday.
“I made the decision to implement within the shortest possible time the package of measures to transfer payments — we will start with that — for our natural gas supplied to the so-called ‘unfriendly’ states to Russian rubles,” Putin said per the Moscow Times.
“It doesn’t make sense to deliver our goods to the EU or U.S. and receive payments in dollars or euros,” he added.
The United States and the European Union, have made moves to freeze almost $300 billion, largely in dollars, of Russia’s international reserve as part of the sanctions imposed on Russia.
Paying only in rubles, would force the EU and the US to buy millions of rubles everyday, propping up the ruble, after it bottomed out after Russia moved troops into Ukraine and sanctions were enacted.
There has been worry that the petrodollar system – used to globally trade oil using American currency – is about to collapse. Other countries, like Saudi Arabia, have hinted that they may be willing to accept the Chinese RMB instead.
If this was to happen, that would be the end of the United States dominance as the world’s leading superpower.
America was taken off the gold standard by U.S President Richard Nixon, who made a deal with Saudi Arabia to trade in U.S dollars in 1973.
The Organization of the Petroleum Exporting Countries (OPEC) adopted the U.S dollar, giving birth to the petrodollar.
With oil being traded in U.S currency, America was able to hold a huge amount of influence and power. The use of the petrodollar also prevented inflation, as countries started to hold on to U.S dollar reserves, limiting the supply of notes in circulation.
The U.S dollar could be wiped out, however, if it is no longer used as the world’s oil currency – putting an end to the country’s economy and the number one spot of global domination.
Germany’s economy minister Robert Habeck, accused Putin of being in “breach of contract” and added that Germany will “discuss with our European partners how we would react to that.”
Germany isn’t exactly in a position to really deal any kind of blow to Russia. Germany relies heavily on Russian gas and oil and Putin knows it. Nearly 55 percent of EU imports of natural gas comes from Russia.
Germany’s Chancellor Olaf Scholz told parliament that if Germany axed Russian gas imports, “our country and all of Europe into a recession”.
“The truth is that the sanctions that have already been decided also hit many citizens hard, and not just at the gas pump,” Scholz said, adding that sanctions “must not hit the European countries harder than the Russian leadership.”
Recently, Germany has made a deal with Qatar to begin importing gas, but Germany doesn’t have the infrastructure to import gas at its ports and no pipeline exists. So Russia will likely be the easiest choice to keep up with demand.
The foreign affairs Minister of Ukraine, Dmytro Kuleba said that “If any EU country bows to Putin’s humiliating demands to pay for oil and gas in rubles, it will be like helping Ukraine with one hand and helping Russians kill Ukrainians with the other. I urge relevant countries to make a wise and responsible choice.”