The question is how do they procure rubles. The EU have 4 options:
exchange gold for rubles with Russia
sell goods to Russia
exchange euros for rubles on forex market
buy rubles from Russia’s central bank with euros/USD
Let’s see how these options play out:
gold is sanction proof and has tangible value
is impossible without lifting sanctions
will cause the ruble to appreciate against the euro, something the US is vehemently fighting against
Russia may not accept USD/euro given the ways their holdings have been weaponized against them
If 4 occurs, this will force unfriendly countries to first purchase an intermediary currency, like the Yuan. The prospect of being forced into purchasing Yuan is something the west has been anticipating but has little defence against.
Going to be a long search given that there aren’t any realistic alternatives. Europe gets around 40% of its gas from Russia, and you can’t just create this new capacity out of thin air. Countries that produce LNG, are already producing it at their capacity right now. LNG is also an order of magnitude more expensive than pipeline gas as well as being subject to market fluctuations. Pipeline gas from Russia is the only reliable way for Europe to have a steady energy supply at a predictable cost.
It’s absolutely shocking to me that European leaders did not think of this when they went along with US sanctions. It’s pretty clear that the reality is starting to set in now at least in Germany.
With the current change it would be equivalent to paying with Monopoly money
Not really. If the Europeans pay for gas with Rubles, that will drive the price of Rubles higher.
And yet he can force them to do it.
I’m not actually sure he can, since some of the contracts are written in Euros.
What are they gonna do if he broke the contract’s terms? Sanction him?
The question is how do they procure rubles. The EU have 4 options:
Let’s see how these options play out:
If 4 occurs, this will force unfriendly countries to first purchase an intermediary currency, like the Yuan. The prospect of being forced into purchasing Yuan is something the west has been anticipating but has little defence against.
5 Search alternatives to the Russian Gas, that is what they are currently do.
Going to be a long search given that there aren’t any realistic alternatives. Europe gets around 40% of its gas from Russia, and you can’t just create this new capacity out of thin air. Countries that produce LNG, are already producing it at their capacity right now. LNG is also an order of magnitude more expensive than pipeline gas as well as being subject to market fluctuations. Pipeline gas from Russia is the only reliable way for Europe to have a steady energy supply at a predictable cost.
It’s absolutely shocking to me that European leaders did not think of this when they went along with US sanctions. It’s pretty clear that the reality is starting to set in now at least in Germany.