Russia is going through a financial crisis since the US and the UK have imposed sanctions on the import of its products including many other penalties. Amid ongoing protests arising from around the globe, Russia is looking for possible partners to sell its massive reserve of oil and natural gas. Recently, in a press conference with stated-owned media, the chairman of Russia’s State Duma Committee on Energy, Pavel Zavalny has expressed his willingness to accept payments in Bitcoin.
During articulating Russia’s stands on declining ruble due to many trade and financial sanctions, Pavel Zavalny revealed Russia’s plan to sell the country’s natural gas and oil in local currency to ‘friendly’ countries like China, Serbia, Turkey.
Russia is currently attempting to move away from doing business in Euro and US dollars to help retain its sharply declining ruble value against USD. The ruble has declined by almost 50% since Russia invaded Ukraine. The price of the Ruble against USD has touched ₽0.006.
Pavel’s comment came after the announcement by Russian President Vladimir Putin on transactions in the ruble. Putin disclosed that countries marked as ‘unfriendly’ to Russia would require to pay in rubles for natural gas and oil instead of USD or the EURO. Currently, the United States and the European unions countries are on Russia’s list of top unfriendly nations.
Europe is heavily dependent on Russia for its oil and natural gas needs. More than 40% of natural gas used by 27 EU nations is imported from Russia along with a quarter of crude oil consumption. To avoid Russia’s forced requirement to accept ruble could be bypassed by Bitcoin and it does not seem to harm any of the involved parties.
While using Bitcoin, a decentralized, ownerless currency for international trade sounds beneficial in this time when every country is working only in their interest, the massive trade volume can create a steep liquidity crunch. In the year 2021, the EU has imported oil and natural gas from Russia worth $108 billion. Even though Bitcoin was made for trustless transactions; international trade in tremendous volume can lead to many potential issues.
Why Russian ruble is declining?
Russia is facing multiple sanctions from the US, UK, and EU countries. These sanctions financial and business penalties are resulting in reduced trade from Russia and driving the ruble downwards against USD.
Is the use of Bitcoin for international trade possible?
Bitcoin could be used for payment across the countries, however, a comparatively low market cap of Bitcoin can be a potential liquidity issue.
Gargi Sinha is working as Senior Journalist at Confea. She has completed her Masters in Journalism from Delhi University. She has interest in crypto and blockchain technology.