Friday, 25 March 2022

Rise of the Petrorouble

 
See here for essential background: http://hpanwo-voice.blogspot.com/2022/03/russia-banks-in-gold.html.
Following the news covered in the article linked above, that the Russian central bank is buying gold, another announcement has been made that can only be described as a logical follow-up. It's actually one I should have predicted. President Putin has announced Russia will now only sell its precious natural gas exports to certain nations in roubles, Russia's own currency. Up until now the trade with Europe has been made in Euroes and the rest of the world in the US Dollar. Oil has always been traditionally traded in dollars and disrespecting that tradition can often have disastrous results, as explained here with some necessary humour: https://youtu.be/sehmmzbi3UI?t=1287. Luckily NATO can't take on Russia directly as it did so easily the "Axis of Evil" nations. The European Union have accused Russia of breaching a contract, but this is a Melian dialogue; the continent is dependent on those gas imports and so Russia holds all the cards. As I said over Brexit, if the EU doesn't like it, they can come and meet us on the beach, see: https://hpanwo.blogspot.com/2019/10/brexit-portal.html. Russia's coin has dropped in value by 22% this month, for obvious reasons, and this is clearly a scheme to resurrect it; however it might have more long-term strategic goals. Trading oil in their own currency, backed by a gold standard financial system and crypto, will not only cause the current trade embargo to backfire totally; it might even undo all the other economic vandalism Russia has suffered for the last decade. This is excellent statesmanship by Putin. The best thing he's done since he turned down the World Bank loans that devastated Ireland and Greece. In terms of the New World Order, it could be a turning point. There are other potential ones in the pipeline, if you'll excuse the pun, but I will cover them in future publications.
See here for background: http://hpanwo.blogspot.com/2022/02/ukraine-war-portal.html.

at

2 comments:

  1. Chaffers25 March 2022 at 21:55

    It's far more than that..

    So the eurozone has cuckstropped out of the Russian markets en masse. Hence they can't earn Rubles by selling VWs, Adidas etc. There is no circle of capital here as the sanctions stand.

    They also cannot buy rubles on the open market. Or nowhere near enough of them. If I held Rubles you wouldn't prize them from my cold dead hands right now. FX swaps for rubles have always been rather thin, there simply isn't the liquidity to swap hundreds of millions of $s worth per day.

    Which only leaves the Bank of Russia as a source of rubles. Who made a very interesting announcement last month..

    http://www.cbr.ru/eng/press/PR/?file=24022022_185158FINSTAB_E25022022_140235.htm

    So as I read that you can buy rubles by selling Euros but at a 2.5% premium. FX swaps generally have no margin, there's no market maker it is normally just a swap at the spot price.

    However selling Euros for rubles ( about 2% of eurozone GDP worth) will depress the euro and strengthen the ruble. And then you only get 97.5% of what you'd normally expect on an FX swap.

    So over time the Euro falls, which makes the gas more and more expensive. A bit like compound interest.

    Note also that the BoR made that announceent a month ago. They anticipated this. And have waited till eurozone gas stocks are practically empty before demanding payment in rubles.

    So Germany for instance can either shut down it's industry or heat and light it's homes ifit refuses to pay.

    ReplyDelete
  2. Ben Emlyn-Jones26 March 2022 at 00:01

    Thanks for the info, Chaffers. The situation is becomning clearer now.

    ReplyDelete