The amount of ill-informed newsprint this has generated is quite unbelievable.
Gazprombank is the only Russian bank easily able to transact in Euros due to its strategic exemption from European sanctions. Gazprom will now only accept payment for gas into its RUB account, no doubt at Gazprombank.
Therefore EU buyers will have to send EUR to Gazprombank who will then credit Gazprom with the appropriate amount of RUB.
In other words banks will have to open a correspondent account with Gazprombank rather than whoever they were using as correspondent previously in Russia.
What Gazprom was doing internally (moving Euros into Roubles within Gazprombank), now everybody has to do. No doubt Gazprombank will make a tidy turn on each of those transactions.
Just as before the Europeans will pay for their gas in Euros, and Russia will receive payment in Roubles.
Due to sanctions in all directions, it’s likely that the only reasonable quote for EUR/RUB available will be from Gazprombank at whatever exchange rate they decide or are instructed to offer.
The sanctions are transitive which means that synthetic EUR/RUB quotes via third currencies won’t offer the usual alternative.
Putin has got himself back on the front page in the West by loudly declaring that what was happening in March will continue to happen into the future - although the names on a few accounts may have changed to protect the guilty. It’s really astonishing. I’ve seen nothing in the press explaining what is really going on. It’s possibly the best April Fools joke ever.
I linked in my previous blog to a talk by Mark van Culijk on the intracacies of interbank payment. The slides are available too. In there he has a slide showing how international payments work.
The gory details and the issues with international transfers have been detailed by Swift in a paper, and there is a more accessible description of the correspondent process from Wise. Both are worth a read depending upon how deep you want to go into the interbank messaging protocols.
Ultimately, it’s all just numbers in a ledger. No gold coins or bags of silver are involved.
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