Xinhua News Agency, Moscow, March 25 (international observation) Russia’s natural gas “Ruble settlement order” highlights three major points of interest in the energy game
Xinhua News Agency reporter Geng Pengyu
Russian President Vladimir Putin announced a few days ago that when Russia supplies natural gas to “unfriendly” countries and regions such as EU member states, it will switch to rubles for settlement. Leaders of some EU member states responded on the 24th that they would ignore Russia’s request.
Analysts believe that the “Ruble Settlement Order” highlights three major points of interest in the energy game between Russia and the West: Russia’s promotion of “Russian currency to buy Russian gas” is intended to counter Western sanctions and stabilize the exchange rate of the local currency; Bringing greater uncertainty; the United States took the opportunity to expand oil and gas exports to Europe.
First, the stability of the ruble exchange rate has achieved initial results. Judging from the current trend, the “ruble settlement order” has provided support for the recently weakened ruble exchange rate. After the news was released, the exchange rate of the ruble against the dollar jumped to a three-week high on the 23rd.
Yushkov, chief analyst of the Russian National Energy Security Foundation and an expert at the University of Finance and Economics of the Russian Government, said Putin’s move was aimed at forcing European countries to lift financial sanctions against Russia. The United States and Europe have banned Russian banks from conducting business in dollars and euros. If European countries buy natural gas, they need to buy rubles from the Russian central bank in euros, which is conducive to stabilizing the ruble exchange rate. Yushkov believes that oil, metals and other commodities exported by Russia in the future may also be settled in rubles.
Salikhov, director of the Russian Institute of Energy and Finance, said that using the ruble for settlement can reduce Russia’s transaction costs and keep the income in Russia, while reducing the willingness of the international market to short the ruble.
Second, concerns about European energy supply have intensified. The “Ruble settlement order” triggered a strong reaction in European countries, and also highlighted Europe’s concerns about further tightening of natural gas supplies.
Italian Prime Minister Draghi said on the 24th that the existing gas supply agreement between Europe and Russia already has currency settlement clauses, and switching to ruble settlement “constitutes a breach of contract”.
Commerzbank believes that Russia’s move has put Europe in a dilemma: if it refuses to settle in rubles, Europe may face the risk of “breathing out”; if it accepts Russia’s request, the EU-Russia gas supply agreement may need to be renegotiated, and then Europe will rely on a long-term agreement. The preferential natural gas prices enjoyed may lapse and energy costs rise further.
Third, the United States took the opportunity to expand its energy influence. Analysts believe that in the face of energy supply pressure from the EU and soaring natural gas prices, the United States is “naturally” playing the role of “reinforcement” to further expand the influence of oil and gas exports.
A number of U.S. and European sources revealed that U.S. President Biden will focus on U.S. liquefied natural gas exports to the European Union when he attends the EU summit from the 24th to the 25th. Relevant plans are being refined, and it is expected that the supply of liquefied natural gas from the United States to Europe this year will increase by about 15 billion cubic meters compared to the previous plan.
As the world‘s major LNG exporter, the United States has previously tried to obstruct Russia’s natural gas supply layout in Europe, and has long opposed the “Nord Stream-2” project, calling it a Russian geostrategic project. The Russian government said the U.S. obstruction of the project was intended to squeeze Russia’s energy market share and to sell more U.S. natural gas to Europe at high prices.
Analysts believe that after the conflict between Russia and Ukraine, the European Union decided to cut its dependence on Russian natural gas, providing an opportunity for the United States to increase the oil and gas industry to replace Russia and expand its market share in Europe.
A Goldman Sachs analysis report believes that the EU may support a long-term contract with the United States for at least 20 years for LNG supply. (Participating reporter: Xu Chao)
(Editor in charge: He Xin)