Since Russia’s invasion of Ukraine on February 24, Western countries have placed great emphasis on sanctions against Russia. The hope is that these will crack the Russian economy. Until now, the sanctions have had little effect on the Russian economy. Russia responds with its strongest and only economic weapon, which is gas for Europe. Today, gas deliveries to Poland and Bulgaria were stopped. Maybe Germany’s turn soon.
Why does Russia want to get paid in Rubles?
Russia will have paid for the gas they supply to Europe in Rubles. This is contrary to the contracts which state that the gas must be paid for in dollars or Euros. Europe refuses to pay in Rubles, thus Russia responds by cutting gas supplies to the European market.
Russia has spent large sums on support purchases of rubles. The ruble fell sharply shortly after the invasion. since then the price has risen and is now back to a normal level again. One of the reasons why the ruble is back to normal is the support purchase of the ruble by the Russian central bank, as well as the fact that Russian oligarchs and companies have managed to exchange their foreign funds in rubles.
Russia will hardly be able to maintain the price of the ruble through support purchases for particularly long. Therefore, the supplies of gas are used in the economic war. If western countries pay in Rubles, they have to buy Rubles in the market, which helps maintain the exchange rate.
Germany’s dependence on Russian gas
Germany made a fatal mistake in 2011. A decision was made to phase out nuclear power. Phasing out nuclear power is perhaps OK from a safety perspective. Seen in a climate perspective, it is wrong. From a security perspective, it is completely wrong. What makes Germany’s decision so fatal is that there were no separate alternatives to nuclear power in place. The decision depends on the import of gas and power.
Nord Stream 2 is a set of pipelines that will transport gas from Russia to Europe and primarily Germany. The United States and a number of other countries were skeptical about becoming so dependent on Russian gas imports. The United States also imposed sanctions on the pipeline.
Germany, for its part, was fully aware that this gas was only a business relationship and would not be used as a means of pressure in a conflict. Rather, Germany pointed out that such an agreement could build a positive bridge between Russia and Europe. Just before the outbreak of war in Ukraine, German Chancellor Olaf Scholz halted the process of approval.
Gas from Russia is used as a means of pressure. It was this danger many have seen and warned against, but which some closed their eyes to. The question is in fact whether Russia would have had enough money for its Ukrainian adventure without the contributions of Germany and other countries in Europe that bought Russian energy.