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On August 23, Ukrainian President Volodymyr Zelenskyy stated that Ukraine did not participate in any actions to sabotage the Nord Stream gas pipeline connecting Russia and Europe. This comes after a Ukrainian suspect wanted by Germany was arrested in Croatia, becoming the second Ukrainian suspect detained in the case. Zelenskyy said, "Ukraine has never participated in this operation, not even in the first place. I hope the investigation will be fruitful. We are ready to provide assistance." Zelenskyy indicated that the Ukrainian Prosecutors Office and the Ministry of Foreign Affairs are investigating the matter.On August 23, some Japanese citizens held a rally in Tokyo to protest the Sanae Takaichi governments attempts to revise the constitution and its series of military expansion initiatives. Participants strongly opposed the governments push to revise the "Three Security Documents" and attempt to amend the "Three Non-Nuclear Principles."On August 23, Federal Reserve Chairman Neel Kashkari downplayed market concerns about rising U.S. Treasury yields, stating that the market is functioning well and the recent surge is unlikely to affect discussions on monetary policy. Kashkari said on Sunday, "All indications suggest that the U.S. Treasury market is functioning normally, trading is proceeding smoothly, and market liquidity is ample, therefore we can use the federal funds rate as the primary policy tool for reducing inflation." Last week, yields on U.S. Treasury bonds of all maturities rose, with the benchmark 10-year Treasury yield closing at around 4.73%. The 30-year Treasury yield remained near its highest level since 2007. Kashkari stated that while current Treasury yields are high relative to recent historical levels, yields in the 1990s were much higher. "We need more data, but I dont want to prejudge the outcome of the next meeting," he said. "However, I dont currently believe that inflation will fall back to the target level in the short term."Russian President Vladimir Putin: Ukraines 40-day "influence operation" against Russia has failed to change the situation, and Russian forces are continuing their advance.On August 23, affected by Typhoon Zitan (No. 19 of this year), many parts of Guangxi experienced heavy to torrential rain, with some areas experiencing extremely heavy rain. Several rivers exceeded warning levels, and some towns in Fangchenggang and Chongzuo cities faced flooding risks. On August 23, Guangxi held a video conference to coordinate flood and typhoon prevention efforts. According to statistics, as of 6 PM on August 23, 64 townships (subdistricts) in 17 counties (cities, districts) of 6 cities including Fangchenggang, Chongzuo, and Nanning experienced heavy torrential rain, with some areas experiencing extremely heavy rain. 92 townships (subdistricts) in 30 counties (cities, districts) of 10 cities experienced heavy rain. 15 stations on 10 rivers, including the Mingjiang River and its tributaries Gongan River and Pailian River, and the Zuojiang River and its upstream Pinger River, exceeded warning levels. The typhoon has affected 61,000 people, with 54,000 relocated and 8,087 people urgently relocated and resettled. All flood control and disaster relief work is being carried out in an orderly and solid manner.

The Russian demand for Rouble payments for gas complicates the EU-Russia energy standoff

Aria Thomas

Mar 31, 2022 10:16

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Russian President Vladimir Putin has directed the government to advise state-owned gas monopolist Gazprom to change existing contracts so that "unfriendly countries," including EU member states, begin paying for Russian natural gas imports in roubles. The Bank of Russia (CBR) will develop a mechanism for processing such payments.


Short-term rouble assistance will come at the price of Russia pressing the European Union to reduce its reliance on Russian energy imports as soon as possible – albeit this will take time given the infrastructure restrictions in the natural gas sector in particular.


Russia seems to have a little financial edge.


Since sanctions froze about half of Russia's abroad reserves, Russia has already compelled exporters to sell 80 percent of their currency revenues in order to boost the rouble. In the case of gas exports, forcing buyers of Russian natural gas to exchange hard money for roubles elevates the rate of rouble conversion to 100 percent.


However, Gazprom's foreign-currency selling obligation may have been increased to 100% in any event. The transition to rouble demand payments is a strategic retaliation against the EU based on Russia's dominance as Europe's biggest supplier of natural gas, with Russian supplies accounting for more than 75 percent of aggregate gas demand in some countries in central and eastern Europe.


The Russian administration is also attempting to strengthen the CBR's capacity to manage the currency by requiring natural gas trades to be conducted in domestic currency and directing major foreign-currency flows through the CBR, a sign of how financial sanctions have harmed the central bank's role in steering the Russian economy.


Rouble payments for gas may increase the CBR's capacity to function under the existing sanctions regime, given the CBR's current limits on its ability to deal with European Union central banks.


The EU is confronting growing energy trade complexity as well as the possibility of gas supply disruption.

Russia's new demand may result in gas contract renegotiation and changes in contract terms, as well as legal challenges if EU countries think the conversion is a breach of contract. Around 58 percent of Gazprom's gas sales to Europe and other countries are paid in euros, with the remaining 39 percent paid in dollars. Any legal stalemate increases the risk of Russian exports to Europe being stopped, which might be unpleasant for certain countries in the short term.


Russia's recent limitations are anticipated to speed the EU's efforts to diversify away from Russian oil and gas in the long run. The European Commission has proposed a strategy to wean Europe from Russian fossil resources by 2030. This approach might cut demand for Russian gas by two-thirds by the end of the year. In the medium term, the Russian strategy may lead to the EU defining lower purchase volumes of Russian gas.

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