Putin Edict on “Gas for Roubles” Consistent With Original Description (and Our Take); Western Officials Nevertheless Claim a Walkback — Yves Smith

We listed a whole set of advantages in our post yesterday that Russia would nevertheless get from a minor-seeming, technical change. The main one was to require gas buyers to tender payments to Russian banks, since only Russian banks could get their hands on enough roubles to execute the foreign exchange transaction (more on an important fine point soon). There aren’t a lot of roubles trading outside Russia. That would prevent the West from sanctioning more Russian banks, something they seemed intent on doing at last week’s series of European summits. It would also mean the foreign currency payments would be in the hands of Russian institutions, and hence not vulnerable to being “frozen,” aka expropriated.

The fact that the West seems willing to go along, and is now incorrectly depicting the Russian detailed explanation as a climbdown, makes it awfully hard for them to object when Russia, as it floated on Wednesday, extends this procedure to other commodities, like oil, lumber, wheat, metals, and fertilizer. That means in having payments from “unfriendly countries” on contracts denominated in their currencies be made to an account at an unsanctioned Russian bank with the customer also effectively ordering the currency exchange to roubles.

One additional advantage of this procedure: it greases the skids for Russia requiring future contracts to be set in rouble terms, not in “unfriendly country currency” terms. Expect Russia to be smart enough not to do this right away. And expect them to do this first on a long-term contract for a must-have commodity. Gas again seems like the prime candidate but another suitable contract expiration might occur at a propitious time.…

While this may seem like getting into the weeds, it is becoming imporatant going forward as countries de-dollarize and decouple from the system that gives the US effective control of the world economy through world trade. It was already coming for some time. Henry C. K. Liu and Michael Hudson were writing about this years ago, for example. Now the speed of transition is accelerating.