Gas to Ruble business strategy, how Putin checkmated West

It was a twin move by the West as Russians entered into Ukraine. Cutting Russia off from the SWIFT and banning Russia using US Dollars & Euro. In the wake of these, 18 Russian financial institutions & banks were sanctioned. Russia made a counter move: the two bank system that checkmated the West. Read for more:

The sanctioned banks and financial institutions include Alfa-Bank, Central Bank of the Russian Federation and Credit Bank of Moscow. However, in order to facilitate import of gas EU spared few banks to operate in member countries including Sberbank and Gazprombank which are the only channels through which transactions were allowed.

Putin introduced a counter business strategy of two-way bank system: commonly titled “Gas to Ruble”. The system unveiled requires foreign importers to open two accounts in banks that are allowed to operate within EU jurisdiction. One for depositing Euro/Dollar. The other is to receive the converted Dollar/Euro into Ruble. Thereafter the bank make a credit transfer out of the second account and the proceeds are cabled to a Russian bank operating within Russia that may or may not be under sanctions. In order to bypass SWIFT the remitting bank uses Russia patented “System for Transfer of Financial Messages (STFM)”.

Expectedly, this ground breaking business strategy achieved the following goals with least effort on the part of Russia:

• Gave plentiful Rubles for Russia and not to be saddled with Dollars or Euro which are now useless for her.  Furthermore, Ruble has gone up in stature as the best performing currency in the world today. At the time of writing the US Dollar–Ruble conversion rate is one Dollar to 62 Rubles whereas in the beginning of Ukr operations it was as high as 78 Rubles for one Dollar.
• Gave fillip to the Russian drive for de-dollarization. Russia got the beating when her dollar reserves amounting to US$ 250 billion was frozen by America. She does not to want to be saddled with further Dollars that  are now useless for Russia as international currency
• The bonanza is curtain going up for STFM as one of the International financial payment system.
• Russian economy got a big boost as trade surplus is soaring. Current trend indicates that end 2022 It would surpass US $ 250 Billion almost a 15% YoY compared to 2021
• Finally it was a classic checkmate the Judo master administered on the West!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist