Western sanctions imposed after Russia’s invasion of Ukraine on February 24 have put constant pressure on its economy. But the war has not stopped Russia’s gas exports to Europe – nor has the wider continent depended on them. This interconnected relationship is at the heart of a recent demand by Russian President Vladimir Putin for “unfriendly” countries to pay for their gas in rubles. “This is an unorthodox game that depends on Europe’s dependence on Russian gas exports,” Eswar Prasad, a senior professor of commercial policy at Tolani and a professor of economics at Cornell University in Ithaca, New York, said in an email.

Demand and also concerns

Russia is Europe’s largest gas supplier, accounting for about 40 percent of Europe’s consumption. This dependence is long-term – as are regulatory concerns. Pierre Noël, a global researcher at the Center for Global Energy Policy at Columbia University in New York, points out that high tensions between Europe and Russia are rooted in Moscow’s foreign policy, as opposed to Russia’s willingness to sell gas to the world. of. A food delivery courier passes by a high-end fashion boutique in Moscow that has been closed due to sanctions on Friday. (The Associated Press)
“The import of Russian gas has never in itself created any security issues,” Noël said in an email. “The problem is that Russia’s foreign policy orientation has become increasingly strong since the early 2000s. It is a problem that Europe would have even if it were not an importer of Russian energy, and the energy relationship does not has deteriorated. “ There have been calls for Europe to reduce its dependence on gas from Russia before the current war, but Noël said there has since been “a strong consensus” that things need to change. (The European Commission has published a plan to wean itself off Russian fuel, but the change will happen over the years.) “Europe has been very good at managing a large-scale energy relationship with a difficult Russia, but it does not want to continue it after this invasion,” Noël said. Russian President Vladimir Putin is chairing a Security Council meeting by teleconference outside Moscow on Friday. One expert says that by demanding payment for gas in rubles, Russia is seeking to show that Putin is “dictating the terms” under which Russia sells its gas. (Mikhail Klimentyev / Sputnik / Kremlin / The Associated Press)
There have also been concerns that Putin’s demand for ruble payments could herald a supply cut in Europe – if that happened, Russia would lose that revenue. “Putin needs revenue as much as Europe needs Russia’s gas, so this situation will eventually be resolved through some kind of compromise,” Prasad of Cornell said. Stefan Meister, who heads the program for international order and democracy at the German Council on Foreign Relations in Berlin, said Russia was seeking “a kind of political victory”, not a halt to the flow of gas. “He wants to show that Putin is dictating the conditions under which he exports gas,” Meister told the Associated Press.

Not a conventional strategy

Russia’s stated demand for a change in the required payments has been met with a push from European leaders, who say they will continue to pay in US dollars and euros. The AP reported on Friday that gas used for electricity and heating was still flowing to Europe, the same day that Russia said it would start accepting payments in rubles. Two women pass in front of a currency exchange screen displaying the US dollar and euro against the Russian ruble in Moscow on Friday. (The Associated Press)
Michael Devereux, a professor at the Vancouver School of Economics at the University of British Columbia, said he found demand for ruble-based payments “a bit confusing” as Russia eventually needed foreign currency to trade in world markets. Prasad expressed a similar view. “Under normal circumstances, a country trying to back up its currency and maintain imports from abroad would look for payments in hard currencies such as dollars and euros and not in its own currency,” he said. Russia’s demand for rubles, Prasad said, would “do little” to acquire these same foreign currencies. Both Prasad and Devereux said it seemed likely that Russia would seek to address the sanctions through a proposed change of payments.

The ruble and its value in Russia

The ruble depreciated sharply after the financial sanctions took effect, but has since returned to pre-war levels. Devereux said it was unclear whether the ruble’s value would be where it would be if it had more open trade with Russia – meaning it could be “significantly overvalued” at the moment. “As a result, if European importers had to pay in rubles, they could end up paying much more than they would otherwise pay,” he said. People pass by closed shops in a shopping center in St. Petersburg, Russia, last month. (The Associated Press)
Perry Sadorsky, a professor of sustainability and economics at the Schulich School of Business at York University in Toronto, said he sees the ruble – and the ruble perception – as the focus of thought behind recent demand. “The devaluation of the ruble is problematic in Russia for consumer confidence and government support for the war,” he told CBC News. “By stabilizing the ruble, Putin can show the Russians that the war is going well and inflation is under control.” Economic historian Kristy Ironside sees a possible double message at play. Part of the message is conveyed by the fact that the ruble is not a useless currency and also that Russia is not dependent on access to US dollars and euros. “He also says to the local population: ‘Do you see? The ruble is recovering, “said Ironside, an assistant professor of Russian history at McGill University in Montreal.