Russian ruble hits seven-year high as countries switch to currency for gas payment
The ruble hit a seven-year high against the euro as more foreign companies appeared to comply with Vladimir Putin’s demand to switch to Russian-currency payment for natural gas.
The ruble jumped 9% against the euro, reaching its highest level since June 2015. The Russian currency appreciated 6.6% against the dollar at 58.0625 in Moscow.
Capital controls, collapsing imports and soaring energy prices have made the ruble about 20% stronger than before the invasion of Ukraine nearly three months ago. The gradual easing of market restrictions by the central bank was unable to reverse the appreciation, which could become a problem for the budget as a large portion of revenue comes from foreign currencies.
On top of that, many of Gazprom PJSC’s foreign clients are complying with Putin’s demands by opening currency and ruble accounts with the gas giant’s lending arm, Gazprombank, to transfer funds for conversion.
“Euro-ruble volumes are very high,” said George Vaschenko, head of the Russian stock trading department at Freedom Finance LLC. “It appears to have been caused by the conversion of hard-currency revenues from Russian natural gas exports to Europe into rubles.”
Trading in the euro against the ruble on the Moscow Stock Exchange more than doubled in volume on Thursday from the previous day, according to data from the Moscow Stock Exchange.
Under the new mechanism, Russian pipeline importers must open two accounts at Gazprombank to handle fuel payments. About half of Gazprom’s more than 50 foreign customers have already opened such accounts, Deputy Prime Minister Alexander Novak said earlier this week.
He did not specify which companies or countries are complying with the new payment mechanism, saying only that some of Gazprom’s main customers have either paid for deliveries or are ready to pay on time, thus avoiding a supply cut. .
Last month, Gazprom halted gas flows to Poland and Bulgaria for failing to comply with Putin’s decree. Finland has said there is a “real risk” that its gas flows will end this week as it refuses to pay in roubles.
“The exchange rate could potentially go even stronger,” said Rosbank’s Evgeny Koshelev. “Excess hard currency liquidity cannot be absorbed by internal means – banks are less and less interested since there is no demand, the population has no way to use it. “
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