Countries will need to create ruble reserves to buy Russian gas

Countries globally may soon have to create ruble reserves within their domestic economies if they wish to continue to buy Russian gas, as Moscow switches payments to its national currency, Ilya Ilyin, the head of the banking and financial markets analysis department at Promsvyazbank said on Thursday.

“In the event of a transition to gas payments in rubles, the partner countries will probably create a certain fund of ruble reserves to facilitate payments,” the expert said.

Russian President Vladimir Putin announced on Thursday that the country is changing the payment mechanism for certain exports, starting with natural gas on April 1. The measure effects countries which have imposed sanctions on Russia in connection with Ukraine and froze Moscow’s foreign reserves.

The ‘unfriendly’ states Putin referred to are the US, UK, Canada, Australia, Japan, Taiwan, South Korea, Switzerland, the 27 nations of the European Union, and a number of smaller countries.

Moreover, according to Ilyin, it may be necessary to reduce Russia’s reserves in the currencies of unfriendly countries, including the US dollar and euro, given the risk of sanctions-related freezing of payments.

Therefore, Russia itself should accumulate ruble reserves.

“With stable exports and budget revenues, an excess of rubles will be formed, which will be directed to state support or temporarily placed in banks,” the expert suggested.

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