Paying in rubles for energy imports from Russia

HUNGARY - In Brief 09 Apr 2022 by Istvan Racz

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PM Orbán has happened to say that Hungary could pay in rubles for its gas imports from Russia if necessary. He sees that as a technical affair, he said.EU Commission head vd Leyen reacted by saying that paying in rubles would clearly breach existing sanctions. So far, Hungary has complied with all sanctions, and it would be bad if the country would break the unparalleled unity of EU states on the subject, she added.Meanwhile S&P said Russia is in the state of selective default, adding Russia is paying debt service in rubles after certain dollar-denominated debts.So in practice, Russia is paying in rubles, whereas western energy importers are obliged to pay in dollars, which is then converted into rubles in Gazprombank, and then those rubles go to the account of the energy exporter. But Russia gets dollars, that is the point.Somehow we have the impression that the original spirit of anti-Russian sanctions could be served better if bondholders could sell the rubles they get in debt service to energy importers, who could then use those rubles to pay for their imports. Otherwise bondholders may get stuck with their unwanted rubles and Russia gets more dollar revenue.But we strongly expect Hungary will not push hard for that if high-level European decision-makers have a better idea.