Power move: gas for rubles. Next moves on the chessboard

The audacity of President Putin's decision to switch payments for natural gas with "unfriendly countries" to Russian rubles can only be compared with the sudden launch of a special military operation in Ukraine on February 24. Figuratively speaking, the president made a knight move that could change the course of the whole game in favour of Russia.

By the game, I mean the confrontation between our country and the collective West that began in 2014 in connection with the return of Crimea to Russia. A year or two after Crimea, the confrontation took a sluggish form and became vaguely prolonged. Something like positional warfare. But Moscow's actions, dating back to February 24 and March 23, translated the positional war into very decisive fighting.

Some commentators attribute the main motive of the decision voiced by Putin to the fact that, they say, the use of the Russian ruble will protect Russia from sanctions. In particular, transactions in rubles will be dispensed with using the SWIFT system controlled by Washington; partners will be offered to use the SPFS system (a system for transmitting financial messages, which began to be developed by the Bank of Russia after the sanctions of 2014).

But in reality, the goal is much more serious: to get rid of the dominance of the US dollar, euro, and other reserve currencies, which 30 years ago at the birth of the Russian Federation became an instrument of its colonial oppression. This is a swing that aims to completely emancipate us from the currencies of the leading "unfriendly countries" that they used to buy up our natural resources and other goods.

For 30 years, they offered us "paper" coming off the "printing presses" of the US Federal Reserve, the ECB, the Bank of England, and the Bank of Japan, and in return they received real resources and products from the real sector of the economy.

Now the most important thing for us is not to make mistakes in the next moves and bring the game to the point of declaring a checkmate to the opponent. The opponent, as follows from the world media, still comes to his senses after yesterday's knight move. He digests the news.

So, the Minister of Finance of Japan Shun'ichi Suzuki on March 24 commented on the reaction of Tokyo: "...the government is currently in discussions with responsible ministries and agencies to assess the situation… Frankly speaking, we don't quite understand the goals and how it will be implemented yet."

The collective West (the United States and its allies around the world) has not yet made the necessary response. But you can already guess what the possible options are.

First. Agree to Russia's terms and start buying natural gas (and then oil and, apparently, all other goods) from it for Russian rubles.

Second. Abandon Russia's natural gas supply, thus rejecting Moscow's "currency ultimatum".

Third. It includes the actions of the second option, but in addition to them - tighten sanctions against Moscow, make them even more "hellish", and teach Moscow a lesson for its audacity.

Judging by the initial reactions of officials and politicians from "unfriendly countries", yesterday's power move can cause a serious split in the camp of the collective West. At one extreme is Washington, which does not depend on Russian gas supplies.

It is a supporter of the third, most rigid option. This option corresponds to Washington's strategic goals of destroying Russia as a geopolitical adversary. But this option would also allow it to solve such a selfish issue as increasing the supply of liquefied natural gas to Europe to compensate for losses from Russian gas.

At the other extreme is Europe, which covers 40% of its natural gas needs through imports from Russia. A complete rejection of Russian gas would be a complete disaster for the European economy and the citizens of the Old World. Even the supply of liquefied natural gas from the New World is not able to cover the resulting shortage of blue fuel.

Therefore, most likely, the reaction of Europe (for different countries) will be a combination of the first and second options. It will reduce its natural gas imports from Russia by canceling some, but not all, of its contracts.

Negotiations will begin on the remaining contracts to amend them. Putin stated: "Unlike some of our colleagues, we value our reputation as a reliable partner and supplier. The changes will only affect the payment currency, which is changed to Russian rubles." The amendments may apply not only to changing the payment currency, but also to payment schemes (in particular, new banks that have experience working with the Russian currency may be involved).

OK, the contracts will be adjusted. But where will importers from "unfriendly countries" get rubles? There were no reserves of rubles in the reserves of the United States, European and other countries of the collective West. The first thing that comes to mind for those who are considering the option of continuing to purchase natural gas from Russia is to buy the necessary rubles on the foreign exchange exchange. But they never traded rubles on Western stock exchanges.

Rubles are available only on the Russian currency exchange. So far, dollars, euros and other foreign currencies are still spinning on it by inertia. But, as it turned out, all of them (with the exception of the Chinese yuan) are "toxic", i.e. they are under the sword of Damocles - sanctions. Soon all these toxic currencies traded in Russia will evaporate, and the currency exchange can be closed. Just as in the late 1920s, currency trading on the Moscow and Leningrad stock exchanges was closed.

The closure of these exchanges in 1930 marked the end of the NEP era. Foreign currency almost completely disappeared from domestic circulation, the only legal money was Soviet rubles issued by the State Bank of the USSR (banknotes) and the Ministry of Finance (treasury notes). To top it all off, the Soviet Union established a state currency monopoly. All foreign currency was concentrated in the State Bank of the USSR and the Bank for Foreign Trade.

In the current situation, it will not be possible to buy rubles directly from the Central Bank of Russia. After all, it has already burned itself on reserve currencies worth at least $300 billion. Therefore, he will no longer be forced to touch these toxic currencies even at gunpoint. In short, the dollar, euro and other reserve currencies have become "persona non grata” in Russia.

Even the average person who has dollars or euros hidden under their mattress scratches their head and thinks: how can I live with them? Maybe tomorrow they will collapse. Or the Russian authorities, taking a course towards de-dollarisation, will establish a state currency monopoly and ban not only operations with foreign currency, but even its storage.

But back to the question: where can an importer who is ready to continue importing natural gas (and later oil and other goods) from Russia get these very rubles? The answer is the simplest and most natural: make money by selling Russia the goods it needs. Let me remind you that Putin's statement about switching to rubles was made in the midst of a war with the West, and this war will not end quickly.

This is a long-distance run. To win the war, we need full mobilisation. Not only military, but also economic. The latter involves the restructuring of the entire economy: its productive forces, industry structure, and management. This restructuring can be called "industrialisation 2.0".

Omitting many details of the discussion, I will summarise that the new industrialisation will require huge purchases of machinery and equipment from abroad. So we will provide the West with a service in the form of exchanging Russian rubles for their machines and equipment.

Thus, equal and mutually beneficial trade and economic relations will gradually be built between Russia and those countries that, for some reasons that are not very dependent on them (i.e., under pressure from Washington), were included in the list of "unfriendly countries".

We can help them get out of this list and become friendly towards Russia. The desire of Western businesses to acquire Russian rubles, which have become very valuable, can weaken or even split the seemingly completely monolithic block of the collective West.

I admit that bona fide Russian partners may not immediately have the amount of rubles that would allow them to maintain the usual volume of imports from Russia. Such partners could be offered ruble-denominated loans. Secured, of course.

However, the security is not in the form of some securities that the omniscient Uncle Sam will try to freeze or arrest at any moment, but something more serious and secure. For example, gold. In the West, there is a lot of gold in official international reserves: the United States - more than 8,000 tons, Germany - more than 3,400, France - more than 2,400, Italy - also more than 2,400 tons, etc.

And one more important detail: collateral gold must be placed on the territory of Russia. Hard? Not at all. On the one hand, over the thirty years of its existence, despite all the disadvantages of its complex history, Russia has demonstrated that it is able to fulfil its international obligations.

On the other hand, the value and indispensability of the ruble may be so high that our future partners (who are still on the list of "unfriendly countries") will agree to place collateral gold on the territory of Russia.

So, in the near future, we can completely switch to settlements with the rest of the world in Russian rubles with both unfriendly and friendly countries. We can also pay with the latter using their national currencies. Among the national currencies of friendly countries, the Chinese yuan stands out especially.

Some Russian banks work with Indian rupees, Iranian rials, Turkish liras, etc. Russian banks also work with the currencies of neighbouring countries, especially the currencies of the EAEU (Eurasian Economic Union) member states. These are: Belarusian ruble, Kazakh tenge, Armenian dram, Kyrgyz som. Work is underway to create a single regional currency of the EAEU.

Russia's announcement to switch to ruble payments has dealt a significant blow to the leading currencies – the US dollar, euro, etc. Within a day after this statement, the exchange rate of these currencies against the ruble noticeably sank, and oil prices in dollars jumped up strongly. But perhaps this is only a short-term effect. The long-term effect may be more serious.

Putin's statement drew the attention of those countries that have long been hatching plans to transfer their foreign trade settlements to national currencies. For example, China, which five years ago offered Saudi Arabia to pay for oil purchased from it in yuan. Riyadh was not against it, but it was afraid of Washington, which jealously ensured that no one violated the "oil-dollar standard" that had developed almost half a century ago (oil can only be sold for US dollars).

Right now, Beijing and Riyadh are negotiating the possible use of the yuan in payments for Saudi oil. I think that Putin's statement will persuade the Saudis to agree to the use of the yuan. This is just one example.

Putin's statement will accelerate the approach of the collapse of the US dollar. As well as the euro and some other monetary units that reigned in the currency world. This collapse can be instantaneous and can provoke serious chaos in the global economy. In this brave new world, there will only be one immortal currency left – gold.

And this leads to a very important conclusion: Russia should prepare for this universal event by accumulating a gold reserve. And it can accumulate a gold reserve in two ways: 1) at the expense of domestic production of precious metal (by the way, Russia ranks second or third in the world in terms of the scale of such production; 2) at the expense of external sources.

More recently, the accumulation of reserves from external sources could be carried out by purchasing gold on the world market using currencies such as dollars, euros, pounds, etc.

In the current situation, it will look different: Russia supplies natural gas, oil, and other resources and goods to unfriendly countries, demanding gold as payment. And if unfriendly countries have a lot of tension with rubles today, then some of them have everything in order with gold.

Yesterday, the Russian president said: "I have decided to implement a set of measures in the shortest possible time to transfer payments, let's start with this, for our natural gas supplied to the so-called unfriendly countries, to Russian rubles." I suggest adding the following words to this command: "and also for gold."