Faced with stiffening sanctions from Western countries over its invasion of Ukraine, Russia is considering accepting bitcoin as payment for its oil and gas exports.
In a news conference held last week, the head of Russia’s State Duma committee on energy, Pavel Zavalny said that when it comes to “friendly” nations such as China or Turkey, Russia is willing to be more flexible with payment options. Zavalny named China and Turkey as “friendly” countries because they are “not involved in the sanctions pressure” against Russia.
“We have been proposing to China for a long time to switch settlements in national currencies for rubles and yuan,” he said according to a translated report. “With Turkey, it will be lira and rubles.”
Zavalny added, “you can also trade bitcoins.” Bitcoin is a decentralized digital currency that is exchanged between two parties without involving banks or other financial institutions.
The day before the news conference, Russian President Vladimir Putin said that his country will no longer sell gas to “unfriendly countries.” The ruble’s value has collapsed in response to the sanctions, which included the ejection of Russian banks from the SWIFT international payments system.
“Unfriendly countries” refers to those that have imposed sanctions on Russia after the war against Ukraine. Some of the countries include: Canada, United States, Britain, South Korea, Norway, Singapore and Ukraine.
The European Union relies heavily on Russia’s oil and gas shipments, further complicating efforts by Western nations to increase economic pressure on Russia over its invasion of Ukraine. The United States has implemented a ban on Russia’s oil and gas imports, even though they obtained a small amount of its energy needs on those shipments.
Putin states, “if ‘unfriendly countries’ wants to buy Russian natural gas, they have to open ruble accounts in Russian banks. From these accounts, payments will be made for the gas delivered from Russian banks.” This announcement caused energy prices to spike earlier this week.
The move is likely to bolster the Russian currency which suffered in value and lost over 20 percent this year. Sanctions imposed by the United States, UK and other European allies, following the invasion of Ukraine, have put a strain on Russia’s rubles and raised its cost of living.
What’s the risk?
Russia’s economy has been battered by the unprecedented sanctions, and needs to be shored up and “Bitcoin is seen as the highest growth asset” according to David Broadstock, a researcher at the Energy Studies Institute in Singapore. However, the value of Bitcoin has swung as much as 30 percent since the beginning of this year. Evidently, accepting Bitcoin, compared with other traditional currencies, increases risk in the trade of natural gas.
Moreover, one of the “friendly” trade partners for Russia is China, however; cryptocurrency is currently banned for use in China. “This clearly limits potential for payment using Bitcoin” said Broadstock. There are concerns that Russian oligarchs could be using virtual currencies to avoid sanctions. This has spurred Ukraine’s government as well as the United States and European politicians to ask cryptocurrency platforms to ban all Russian users. But many firms have ruled this out.
Sources:
Russia proposes bitcoin for oil shipments to ‘friendly’ countries (nypost.com)
What Is Bitcoin and How Does It Work? – Forbes Advisor INDIA
Explained: Eclipse Attacks On Blockchains And How To Stop Them (cnbctv18.com)
Putin says Russia will make ‘unfriendly’ countries pay for gas in rubles | CBC News
Great post! It’s fascinating to see that Russia is moving to use Bitcoin for oil and gas, since as you mentioned Bitcoin is currently banned in China, one of Russia’s biggest allies at the moment; it will be very interesting to see how this move affects cryptocurrency.
I agree with the crypto platforms’ decisions not to ban Russian users from using cryptocurrency. Even if Russian officials are using cryptocurrency to avoid sanctions, I think a blanket ban on Russians using crypto is unfair to the population at large.
Even if Russia tries to use Bitcoin as the value of ruble has degraded, it will probably take a longer period to regain the economic loss that they have suffered. Because not all ‘friendly’ countries use bitcoin as a form of payment for the economic sector. It will be really interesting to see how Russia comes up with this strategy specifically for oil and gas.
Interesting post. If this were to happen, I wonder how much that would influence the “value” of Bitcoin and other cryptocurrencies. I know that Bitcoin is still pretty volatile, and changes like this can alter the perceived value / cost of it (for lack of better terminology). Even if third-party crypto services were to ban Russian users from using their services, couldn’t Russia just create their own or something equivalent? I feel like it is better for cryptocurrency to, in general, remain as decentralized and unregulated as possible.
Good post! It is interesting to see how Russia is considering receiving payments in bitcoin. In my opinion, this move will eventually result in Russia having possession and control of all the bitcoins. This is a very smart move but I don’t think it can work out at the moment as not all of the Russia’s ‘friendly’ countries, especially China, its biggest ally, use bitcoins. It will be interesting to see Russia’s next move.
I find it very interesting that Russia is considering using bitcoin for natural gas payments, I mean it only makes sense for them to do that since their economy is being destroyed and their currency is very cheap. The one thing I was most surprised about was that the Ukrainian government as well as the United States and European politicians thought to ask cryptocurrency platforms to ban all Russian users. To me, this just shows how much computers and technology can do nowadays, and how much power they can have in today’s politics. This also shows us how important info-sec is because without having proper security measures in place for things like this, something very wrong could happen.
Hey great post, I knew that eventually, Russians would look for an alternative way to get their payment for their oil and gas. But the fact that they settled on Bitcoin, is a bit of a risky endeavor. Bitcoin is highly volatile and at any given time, the prices are plummeting drastically. However, this itself presents an interesting opportunity for crypto markets because a country as big as Russia adopting the bitcoin could point to its lasting stability and possibly open a future of transactions.
It’s fun to see Putin find ways to try to get around different sanctions and artificially inflate the value of Russia’s currency. Your post highlights the value that cryptocurrency can have as a decentralized currency. Unbiased and universal. However, it is relatively volatile and as environmental concerns loom, it could lose its value as time goes on.
I wonder if this will actually result in some regulations against bitcoin and cryptocurrencies, as using the to bypass sanctions could warrant actions from governments wanting to deter Russian aggression through sanctions. Also would the willingness to be adopted also be in part since Russia has one of the largest amounts of cybercriminals who accept payment through cryptocurrencies? Interestingly enough the article mentioned that bitcoin was one of the highest growth assets but I wonder if they also see it as an potential loss asset which may indicate that Russia is really struggling financially. In addition I wonder if this currency switch could undermine the Rubles values?
Hey, amazing post! You bring up a fascinating point about Russia trying to push bitcoin to countries with whom they have a trade relationship. Since it doesn’t involve banks and most banks aren’t currently doing business with the nation, it makes sense for them to cut out the third party completely and switch to bitcoin. This goes to show how desperate the financial situation of the country is given how volatile the value of bitcoin is. Even their close trade partner China has banned the use of cryptocurrency. I do not know why, but in recent years I have heard a lot about bitcoin scammers originating from Russia too. There seems to be this unusual correlation between Russia and cryptocurrencies. I am very fascinated with cryptocurrencies and blockchain technology but I believe the purpose of this technology was to open up new horizons rather than be used for funding needless wars.
Great post!
It unfortunate to see that the Russian people are being affected by this conflict with the depreciation of their currency and a decrease in their purchasing power. A transition to Bitcoin could be scary since it’s volatility can affect people day to day. An interesting thing I read about Russia prior to the war is that Russian banks bought a lot of gold. Gold and Bitcoin have been compared quite a lot as symbol of value (ie they will always maintain value).
Interesting topic! They’re attempting to insulate themselves from the rising inflationary pressures that are affecting the Russian ruble. So crypto has been a great way for them to handle the risks they’re experiencing, and it’s a terrific source of liquidity for them. According to both industry chatter and their company’s experience, a lot of the money coming from Russia has been flowing into Dubai’s real estate.
While I find bitcoin a bit dodgy as a currency in that it monetary policy cannot be enacted with it (it is theoretically finite in number), Russia’s use of Bitcoin as a form of payment is technically using the cryptocurrency as originally intended; a decentralized currency that is theoretically immune to the powers of established financial institutions. If crypto holding/wallet companies were to acquiesce to pressures to have Russians banned from using their services, would this not destroy the original purpose of cryptocurrency? Would this not ruin the point of putting money into digital and decentralized assets? It certainly complicates the situation; hopefully this all ends soon and nobody will have to make tough decisions.
The sanctions on Russia are interesting to read about because if the effects upon Russia are continuously disastrous, we may have found a new method to deter wars around the world. While the Russian economy suffers, it is interesting to see it try to move to cryptocurrency a couple of months after the Bank of Russia was recommending implementing regulations to prevent the growth of crypto within its country. It will be interesting to see the effect this has on crypto prices, as crypto is not government regulated meaning that there may be an out for Russia in it’s current financial crisis.
Thank you for sharing! Due to the war between Russia and Ukraine, many Western countries have increased sanctions on Russia, and Russia is considering using bitcoin as payment for its oil and gas exports. Also if ‘unfriendly countries’ want to buy Russian natural gas, they have to open ruble accounts in Russian banks. I’m curious how much this will affect the “value” of Bitcoin and other cryptocurrencies and what will Russis move next.
A really interesting post! I wonder if China agrees with their characterization as a friendly nation, particularly in light of the comments they made regarding the aggression. Either way it’s also interesting that Russia is electing to accept cryptocurrency. A lot of people hold up cryptocurrency as a means to avoid what they consider to be “bad” government actors. I wonder, then, if the same people would still approve of the use of cryptocurrency in propping up a country which engaged in an arguably unprompted war against another sovereign state.
It’s nice to see the push for cryptocurrencies being accepted as legal tender in many countries. The major drawback is that it is very volatile and poses huge risk to the economy. The trade of oil and gas is a major industry and significant fluctuations in bitcoin prices can have negative implications for the Russian economy.
I agree! No one actually can predict how it will all go when it comes to the journey of crpto-currencies. This is the main reason I am not going to get involved with any of it any time soon.
Wow I never knew about this! It’s interesting how the pressure of sanctions has caused an economy to think of alternatives such as cryptocurrency. That being said, it seems like a desperate and rather risky move, considering how volatile the cryptocurrency market is. Overall, I’m not sure how accepting Bitcoin would improve the Ruble’s value considering the heavy sanctions that are imposed on Russia.
The use of bitcoin will not work as to rebuild the weak economy . Great job , with the ideas you presented and everything .
This was a very interesting post! As a german, this topic has been of high interest to me as 60% of Oil and Gas in Germany is imported from Russia (or was before the war). I only read about the Russian Government demanding payment in Rubles so that the NATO countries have to reopen international banking systems such as SWIFT for Russian Banks so that Russia can properly participate in World Trade again. This certainly is a sign that the sanctions imposed on Russia seem to be working and are actually hindering their economy, thereby pressuring the government.
It seems as though the Russian Government has a lot of trust in Bitcoin as a valuable asset. I wonder if that is going to affect the value of bitcoin over the next couple of weeks.
Russia is very quickly feeling the impact of unprecedented sanction. There is a need to shore up the economy and in many ways, Bitcoin is seen as a high growth asset
Good Post! It is certainly interesting to see Russia opting for alternatives to their own currency for their natural gas transactions, considering the massive effect that international sanctions have had on Russia’s currency. I can see how Bitcoin would be an appealing option, because of its decentralized and digital nature, Russia could potentially sell their natural gas for a good price in spite of the devaluation of their currency. Moreover, with many Western companies pulling out of and ceasing to do business in Russia, the fact that many cryptocurrency platforms have refused to pull out, makes using their currency even more attractive.
Neat part about trading in bitcoin is that you can’t easily just call up your local national bank and ask to print more money. Russia’s supply of bitcoin, even with their extensive mining centers are going to struggle to scrap together enough bitcoins to actually use it as a proper currency to trade for a commodity such as gas. That’s even less to say that the price of bitcoin is highly volatile, and that one day the money in a citizens account could be worth twice as much, and the day after a tenth.
Cryptocurrencies are not prepared to be used at such a large scale in my opinion, and to me this seems like a very confused attempt to mitigate the economic damage of the sanctions from the rest of the world. It’ll be interesting to see how this develops socially, and if I had to guess, we’re in for a treat of fireworks going forward from Russia.
Thanks for the post!
Hi, this was an interesting topic to read about! First thing that came up on my mind was what would happen to the values of these cryptocurrencies. I assumed there will be an inflation in these markets and this will impact a lot of people. Reading about this really surprised me!
This was definitely are really interesting post! I never knew Russia started to go for bitcoin payment for its oil and gas. Even though Russia has been looking at its “friendly” countries in this situation for any kind of aid, it would not help if the whole cryptocurrency scene is not present in the first place (it is banned in China, as mentioned in the post). Although I personally never had any interest in cryptocurrency, I am looking forward to see how the whole market changes, if those transactions begin to happen (since oil and gas definitely would affect an economy a lot).
Great job!
It is a very interesting post to read. I mean in this generation we know crypto currency is well known and a lot of country started to using it for their daily necessity. I am eagerly waiting to see when it will takeover all over the world like other country accepted it. Thank you.
Very interesting post. Cryptocurrency has always intrigued me especially because it operates outside of the control of a single government. Russia turning to bitcoin is an interesting occurrence. I remember some south American nations also accepting bitcoin as their currency becoming virtually worthless and this seems like a similar case. I would like to see how this will affect the perception of cryptocurrencies in the future and if more governments will accept cryptocurrencies.
This is a fascinating article! I’m not sure whether China believes with their portrayal as a friendly country, especially given their statements about the hostility. In any case, Russia’s decision to embrace Bitcoin is intriguing. Many people see cryptocurrencies as a way to bypass government agents they regard to be “evil.” Overall, I’m not sure how admitting Bitcoin will increase the Ruble’s value, especially given Russia’s severe sanctions.
Ukraine- Russia war has actually impacted the entire financial system and I was astounded to know how much impact international transactions can have on other economies. Now that Russia has been banned from many foreign transactions, I think Russia’s strategy of doing transaction using Bitcoin might be beneficial. However, the biggest problem they are going to face is that bitcoin is not being accepted everywhere. However, larger transactions with bitcoin would lead to a higher demand and value of the currency and therefore if it reaches a stable value, people might start using it more. But for now, everything is uncertain!
Awesome post! It is quite fascinating to watch Russia pivot towards using cryptocurrency, especially in the wake of the events that have transpired over the last three months. Clearly, global sanctions have crippled the Russian economy, and Russia believes that cryptocurrency can remedy the damage that has been done. If tensions persist between Russia and the rest of the world, which they likely will, it might be inevitable for Russians to embrace the reality of cryptocurrency, and possibly, this move might help Russia rebound from the aforementioned sanctions.
This is pretty interesting from a geopolitical standpoint, China is generally pretty anti-cryptocurrency and Russia, their closest geopolitical “friend” is looking to adopt cryptocurrency due to the massive sanctions against them. I don’t believe that China would want to do business in Rubles, nor Russia would want to do business in Yuan. With Russia not being able to access most of their foreign currency reserves, Bitcoin may be one of the “middle-ground” solutions to do business with the current political climate.
I also find it interesting that Russia is willing to risk the value of the ruble dropping even further by accepting bitcoin. If unsuccessful, ordinary Russians will pay the price of this gamble. But a successful economic boost via bitcoin could set a precedent for countries hit with sanctions in the future, potentially decreasing the effectiveness of such measures.
How interesting. Russia seems to be doing everything they can to get around these sanctions. Opening Bitcoin as a payment option seems like a bold move, as the prices fluctuate frequently, but it may in the future act as a suitable stability option for them. The value of their currency going down by 20% in less than a year is unfathomable, but it’s happened. I hate to admit it, but it’s a smart move making the “unfriendly” countries open Russian currency bank accounts to purchase natural gas. Slowly (if they were to oblige) the “unfriendly” countries would just be assisting in Russia’s efforts of building their economy back up. “Friendly” nations such as China and Turkey (to Russia) will simply have a head start on this. The price of Bitcoin if Putin allows this to happen, will probably increase dramatically, Though if the US among others try to block out the purchasing of Crypto currency with Russian currency the solution may be short term. Only time will tell.
It’s interesting to learn that Russia would like to accept Bitcoin as payment for international sales of oil and gas given how volatile Bitcoin is. I wonder if this move would lead to more regulations against cryptocurrencies, and if more institutional adoption is coming.
Great post! Interesting to see Russia’s response to its deteriorating economy. It seems like a very desperate petition to use cryptocurrency. I’m not sure if bitcoin will salvage it, especially with its ban in China, but I’m interested to see the outcome of this. Thanks for the great read!
This is a very interesting post! I did not know that countries have started being open to bitcoin. I am really interested in what will happen next after Russia. Great post!
While opposed to Russia’s current actions, I think that using Bitcoin to avoid total financial ruin is not a terrible idea. Many people active in the cryptocurrency community have called for some sort of action against Russia-based accounts. However, surely this would defeat the purpose and selling point of many cryptocurrencies.
This was an interesting and well written post! Personally, I view the Russian response here as an admittance of desperation. Russia’s flexibility with “friendly” countries here is borne out of necessity more so than camaraderie. Other countries don’t want to pay in Roubles because the Rouble has – for all intents and purposes – become worthless. As stated in your article, the move to accept bitcoins is a dangerous gamble for Russia to try and bolster the value of their own currency in the wake of the (deservedly) harsh sanctions they’ve received. Bitcoin was originally formulated as a decentralized currency whose production could not be monopolized by any one state. It’s unsurprising that platforms have declined to ban Russian users, but I fear that the move could result in states banning the use of cryptocurrencies altogether and citing their potential to prop up the Russian economy as a reason.
Excellent post! It’s intriguing to observe how Russia appears to be doing everything possible to circumvent the sanctions as consequences of their attack on Ukraine. Given the volatility of bitcoin, it’s worth noting how Russia began taking bitcoin in exchange for oil and gas. I believe that this reckless and risky approach is a terrible move given Russia’s worsening economy, but it is evident that Russia is doing everything conceivable to evade the sanctions imposed on them. From a political aspect, China, their close ally, is typically anti-cryptocurrency and has banned cryptocurrency all over.
It makes sense that Russia is now looking at cryptocurrencies to deal with the sanctions and help their economy. It defintley doesn’t help them that China one of their ‘friendly nations’ has banned cryptocurrencies. I wonder how much of an affect this could potentially have on the value of bitcoin or other cryptocurrencies however if something like this was to happen.
Nice post! It will be interesting to see how Russia will (or at least try to) use bitcoin to uphold/help it’s economy. Considering the volatile nature of cryptocurrency and the huge risks associated with it, I don’t believe this will be a viable tactic. This could probably work for a short period of time, but in the long term I’m convinced that this tactic will collapse. But I guess we will have to see what happens due to many changes in this event.
Excellent post! I think the fact that Putin is even considering accepting Bitcoin as payment shows how desperate Russia has become. Every transaction on the blockchain is public (address from/to & amount), so any country that makes payments to Russia could be identified and face sanctions from the wider international community. Even if this did turn out to be a success, this may not help Russia’s economy in the long term, especially since Russia’s own currency would effectively be bypassed in all of these transactions.
Great read! I am actually not suprised that Russia has proposed this. With current sanctions Putin would want to try and figure out a way around them and to perhaps be the one to “take a step into advancement”. The unfortunate side here is that his rash decisions will ultimately effect his citizens more than he could imagine. It’ll be interesting to see how he attempts to make this work in his deteriorating economy.
Undeniably there are many that use crypto currencies to get around the sanctions. Even though these currencies are highly volatile there isn’t really another choice. The interesting thing here is crypto currencies becoming a form of payment recognized by states further legitimizing their use. It would be curios to see whether or not states would engage in such transactions, especially after the war ends(if it ever does).
Nice post! I agree with the decision of crypto platforms not to exclude Russia from transactions. Especially since the nature of these cryptocurrencies was to be decentralized in the first place. However, I can definitely see this decision also backfiring on these crypto platforms. Sovereigns nations may not like the fact that Russia or any other sanctioned nations can use cryptocurrencies to circumvent sanctions. This could lead to several restrictions or an outright ban on cryptocurrencies.
I am very curious to see how this will go since China has banned bit coin. I wonder how these two power houses will interact with one another with this big difference.