The Petro-Ruble

Putin has just announced that Russian gas will soon be traded in rubles for customers located in hostile states such as the US, EU and UK. Dollars, pounds and euro will not be accepted.

This means that the states in question will either have to buy gas from other sources, or find a way to get hold of rubles. If they choose to find alternative sources, they will have to pay a premium to what Russian gas would cost. But if they choose to trade in rubles, as demanded by Russia, they will have to deliver goods or services demanded in Russia. Alternatively, they'll have to go to places like India or China and trade with them in order to get rubles that those countries have in reserve. Either way, Russia will benefit from increased trade.

The move by Putin is an obvious one, considering the situation Russia is currently in. The ruble is under attack, and the best way to strengthen it is to make people demand it.

Whatever sanctions are currently in place will soon fade in face of reality. The world doesn't produce enough gas for us to drop Russian gas. Market forces will find ways to get gas out of Russia. If states hostile to Russia remain steadfast in not taking Russian gas, other's will take it at a discount. This will lead to increased trade via neutral nations such as India and China. Goods and services will find a way to flow via middlemen.

All of this is so obvious that only a staggering lack of foresight can have convinced anyone to go along with sanctions. Not least because the consequences of what's now happening will be a permanent shift in how things are done. Once gas is traded in rubles, there will be no way back to dollars, euros or pounds. Only countries that have a trade surplus will have the luxury of paying in their own currencies.

The next big move will be China demanding yuan payments for their products. Deficit nations will no longer be able to live off of their ability to generate reserve currency through fiat, and that's terrible news for the UK and US which are currently running record trade deficits. It's probably also the end of the euro, because Germany is pretty much the only country that's running a surplus in the EU, and there's a limit to how much longer they will continue to subsidize their parasitic neighbors.

Vladimir Putin

By Kremlin.ru, CC BY 4.0, Link