Russian Energy Giant Gazprom Wants Rubles, Not US Dollars, For Its Arctic Oil Exports Amid Western Sanctions

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Russia Gazprom Oil Tanker
Oil is pumped into an oil tanker at the Ust-Luga oil products terminal in Russia. State-owned energy giants are now accepting payments in Russian rubles and Chinese yuan -- as opposed to U.S. dollars -- amid Western sanctions against Moscow.

Western sanctions against Russia are forcing its state-owned energy giants to ditch the U.S. dollar. Russia said this week that it would accept payment for its oil and gas exports in Russian rubles and Chinese yuan, the business daily Kommersant reported via the official news agency RIA Novosti.

Russian gas conglomerate Gazprom OAO (MCX:GAZP) said it would take rubles in exchange for shipping 80,000 tons of crude oil from its Novoportovskoye field in the Arctic to Europe, Kommersant said. Two tankers carrying the crude departed last week and are due to arrive in Europe next month. Meanwhile, the daily said Gazprom would take yuan for shipping oil via the state-owned pipeline monopoly Transneft AK OAO’s (MCX:TRNFP) Eastern Siberia-Pacific Ocean pipeline, which links to a refinery in Daqing, China.

The currency switch is a protective measure for Russia and its state-controlled entities. Since U.S. dollars can be controlled and tracked by the American government, Moscow has begun avoiding making transactions in greenbacks, Kommersant said. Crude oil has been a U.S. dollar-denominated commodity for more than half a century.

The European Union and the U.S. in March introduced a round of sanctions against Russia after the Kremlin annexed Crimea, a peninsula formerly within Ukraine. In July, Western governments ramped up the penalties amid Russia’s escalating intervention in Ukraine, as well as Russian President Vladimir Putin’s refusal to scale back support for rebels after the July 17 downing of Malaysia Airlines Flight 17, aka MH17. The latest sanctions target the energy, finance and military sectors, with one provision banning the EU and the U.S. from exporting advanced oil technologies to Russia.

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