On March 30, the Russian government has demanded that European countries pay for their natural gas imports from Russia in rubles, rather than in dollars or euros.
"In order to purchase Russian natural gas, they must open ruble
accounts in Russian banks. It is from these accounts that payments will be made
for gas delivered starting from tomorrow," Putin said in a television
appearance.
"If such payments are not made, we will consider
this a default on the part of buyers, with all the ensuing consequences," the
Russia leader said. "Nobody sells us anything for free, and we are not going to
do charity either; that is, existing contracts will be stopped."
The decree targets the United
States, the United Kingdom and European Union countries, which Putin calls
"unfriendly," the Voice of America said. Europe gets about one-third of its gas
from Russia.
Despite the strong words,
Italian Prime Minister Mario Draghi and German Chancellor Olaf Scholz
reportedly said they had spoken to Putin and were told existing contracts will
remain in place.
The move to force ruble payments is seen as
retaliation for the vast array of sanctions the West and other countries have
placed on Russia since its invasion of Ukraine last month.
The IMF warns
The International Monetary Fund (IMF) has warned that the US dollar dominance as the global trading currency could be threatened by the sweeping sanctions taken against Russia from the late February 'military operations' undertaken in Ukraine. The IMF is worried that using currencies as a weapon will fragment the world economy while making it less efficient.
There are now countries rushing to find ways of transacting and storing money that circumvent the US currencies and financial markets, as well as those of their allies. Some countries are renegotiating the currency in which they get paid for trade, according to Steven Sahiounie.
Western countries, in unison with the US, EU and NATO, have imposed huge sanctions on Russia, including restrictions on its central bank, which could trigger the emergence of small currency blocs based on trade among separate groups of countries.
Russia has sought to reduce its dependence on the dollar after the US imposed sanctions in retaliation to its annexation of Crimea in 2014.
China-Ruble Settlement and the Dollar System
Gita Gopinath, the IMF's first deputy managing director, was quoted by Sahiounie as saying that the greater use of other currencies in global trade would lead to further diversification of the reserve assets held by national central banks and added, "Countries tend to accumulate reserves in the currencies with which they trade with the rest of the world, and in which they borrow from the rest of the world, so you might see some slow-moving trends towards other currencies playing a bigger role [in reserve assets]."
Two monetary systems might emerge, with one western and the other Chinese, and may operate in divergent ways that overlap.
The Great Economic Rivalry, by Graham Allison and associates at Harvard, have concluded that China is strong peer competitor of the US, and its currency could become global money, given the size and sophistication of its economy.
China hopes its currency, the yuan, also known as renminbi, will replace the US dollar as the global currency. The majority of international investors believe this will be inevitable, but none can say when.
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