On March 31st, 2022 President Putin signed a decree that requires foreign buyers to pay for Russia’s oil and gas with rubles. This decree takes effect on Friday April 1st and any contracts that are not paid in rubles will be halted.
Putin added that all oil and gas buyers must have Russian bank accounts in order to transact with rubles. If payments are not made in this manner, the transaction will be considered a “default” on the buyer’s side. “Nobody sells us anything for free, and we are not going to do charity either - that is, existing contracts will be stopped,” he says.
On March 24th, the Head of the State Duma Committee on Energy Pavel Zavalny said in a press conference that the country was open to accepting other currencies along with Bitcoin in exchange for Russia’s oil and gas. There have been no updates on whether that is still a consideration for Russia but Putin’s latest announcement implies that they are sticking with the ruble for foreign transactions.
The USD/RUB pair spiked to a peak of 121 rubles for 1 U.S. dollar on March 10th and is recovering to prices prior to the Ukraine invasion.
With Russia providing over 38% of the E.U.’s imported energy, Putin is taking advantage of the situation to enforce the ruble. Western companies have currently rejected the request but countries like France and Germany are preparing for the possibility of a complete halt in gas flows for their residents.
Putin’s decree enables an exchange mechanism for foreign buyers to send their currency to a Russian bank’s special account. The foreign currency is then exchanged for rubles and then sent back to the foreign buyer to complete their transaction for oil and gas. Putin plans on sticking to this obligation in order to decrease Russia’s reliance on other nations.
Samson Mow, former CSO of Blockstream, touched on the subject, noting that returning to sound money would be inevitable.