Putin’s requirement that its “enemies” purchase Russian energy with rubles is of no economic consequences for the ruble or anything else. NATO will reject this symbolic diktat, effectively imposing a ban on Russian energy — NATO’s unused economic sanction. Putin is again shooting Russia in the head.
Is Putin an evil genius as everyone believes? Or is he an evil idiot as his actions belie? Putin’s insistence that Germany and other NATO purchasers of Russian energy do so in rubles adds to the mounting evidence that he’s an idiot. As for evil, Putin is a serial killer, whether we are talking about killing individuals or countries. No doubt he will shortly be tried, in absentia, as a war criminal.
Why is Putin’s rubles-for-energy requirement first-order stupid? Won’t it support the value of the ruble and, thereby, reduce the cost of whatever imports Russians can still purchase? Certainly, the press has drunk this Kool-Aid.
But the answer is absolutely not.
Take Germany. It’s been buying Russian energy with euros. The transaction entails Russia ending up with more euros and Germany ending up with more energy. Under Putin’s decree, Germany would use euros to buy rubles. It would then use rubles to buy Russian energy. The extra hoop through which Russia requires Germany jump leads to precisely the same outcome — euros are swapped for rubles and rubles are swapped for Russian energy. Germany ends up with the same Russian energy and Russia ends up with the same euros.
As for the ruble-euro exchange rate, the extra demand by Germany for rubles is offset euro-for-euro by the reduced demand for rubles by Gasprom, the Russian energy exporter. Why? Because Gasprom will no longer be paid in euros, which it’s been selling for rubles. Yes, Gasprom may have been hoarding some euros. But, by law, it was required to convert 80 percent. As for the remaining 20 percent, whether it’s held in Gasprom’s account with the Russian Central Bank or in the Central Bank’s own account, makes no difference. Gasprom is fully controlled by the Russian government. So, if it needs more euros, it can always grab them from Gasprom. Indeed, that’s what the 80 percent rule is conveying.
Putin’s cosmetic rubles-for-energy demand would have no economic benefit were Germany and other “enemies” of Russia to comply. But compliance with a Putin diktat, even of no economic consequence, is not something to which NATO members will agree. It’s akin to requiring they package the euros they are now sending to Russia for energy in boxes painted with the Russian flag.
Not gonna happen.
What will happen is that NATO countries won’t comply and Putin will be forced stop the sale of Russian energy or lose face. Thus, he will impose on Russia the remaining major economic sanction the West can impose on Russia — a ban on Russian energy imports, albeit implemented via a Russian ban on energy exports.
In short, Putin is shooting Russia in the head yet again. His comrades would do far better to retarget his gun.