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Putinomics: Orchestrating Divisive Energy And Tale Of Rising Ruble
The rise of the ‘Ruble’ may simply take out the wind from their sails. Contesting economics, is this the new Russian Chessboard of Putinomics?
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Energy intertwines socio-economic-environmental sustainability. The reader is rather gripped by ambiguity, immersed into deep thinking, when contextualising this thought, connecting with the prolonged and ongoing geo-eco-politico special military operations by Russia on Ukraine. Energy unites or is it divisive by nature? Will the event per se catalyse the emergence of a new world order?
The world economy was at the doorstep of an upward trajectory, after almost two years of the ravaging Covid-19 pandemic. But it was a short-lived affair as Russia, to its best understanding and belief, launched its special military operations. The world plunged into a new phase of volatility and uncertainty. Evidently, the energy segment was the first one to witness the brunt, resulting into spiralling global oil/gas prices.
The economic scenario
Whilst sweeping economic sanctions by combined global forces on Russia was intended signal to blow-down and cool off the frictional heat, the Russian leadership remained steadfast, willing to tread the parched pathways. The high-pitched sentiments exchanged under the United Nations (UN) umbrella failed to metamorphose into tangible de-escalation, this was followed by multiple resolutions by the European Union, showcasing of support to Ukraine by visits of European and other world leaders further followed by the decisions made at the recently concluded G7 meet at Germany. Irrespective of all these, the hostilities have entered into an intensified engagement now in its fourth month.
Retaliatory economic sanctions have double-edged profile. As the western nations started imposing financial and economic strictures on Russia to force its hands towards defusing the escalation, they also exposed themselves to the Russian Energy salvo. Did Russia do its homework well on anticipatory economics? Apparently, it seems so.
Some forensic thinking is required on the aspect. The year 2021 saw European imports of Russian gas to the tune of around 40 percent of its consumption. The crude imports from Russia accounted for around 25 percent of Europe’s requirement. As hectic diplomatic channels were being exercised to end the amplifying dispute, initially there was no ingress on interests in the Energy front. The Russian gas pipelines account for around 70 percent volume export to Europe and the mutually agreeable arrangement was in continuum sans any pumping losses.
As the ground situation prolonged and the sanctions began to pinch the Russian economy, Russia opened its second front. It was one of economic contestation. Citing the sweeping sanctions by the West, Russia asked its agencies to seek payment in Russian currency of Ruble for the Russian gas supplies. It requires foreign buyers to open accounts in Russian banks, transfer the currency of their choice to get back equivalent Ruble for payment of the goods and services in the energy sector. The game changing approach has been unleashed just by a tacit act of changing the currency for payment acceptance. This decision of the Russian leadership has created a paradox for many. Predictably, the European conglomerate is in opposition to the unilateral Russian decision and this maybe later sub judice at international forums, but the immediate effect of this decree for energy payments in Ruble has boosted the Russian currency, which had hit new lows after its military action. Is it aimed at tag sharing the Big Bro name! Interesting, isn’t it?
Without succumbing to the global pressures, OPEC has steadfastly refuted calls to up its oil production, and USA is still assessing tapping into its reserves for stabilising the energy supply chain. As an insight, alternate arrangements for sourcing energy can be put in place for Europe but the escalated cost may mutate new complexities in the high-stake game. The pipeline route being the cheapest logistically, all other transport means are sure to create further price propulsions of petroleum products. The initial response by the actors of a seemingly cohesive global front effectuated geo-economic hardships on Russia, but the use of Energy leverage as a countermeasure can potentially drive a stake through this collaborative act of unity.
What transpires next is yet to get revealed! Assumingly, for near future, compelling need for Energy security is sure to influence the global decision making on the belligerents. After all, before being supportive to territorial integrity of other nations, the economic security of a nation’s self is paramount. Though there are now signs of collaborative approach by the EU nations to put an official embargo on Russian oil/gas but the long-term adherence on the same will be result of multi-dimensional factors. As a citation, to reduce its dependency on Russian gas supplies, Germany has gone back to coal for many of its power generation plants, which is like going back to square one for its climate change action plan. From being a leader in energy transition initiatives, it is suddenly forced to make an unannounced pit stop and fall back in the race. Several such instances may come forth from other nations too. Experiential strategic instances prove that tunnelled vision tantamount to compromising own’s sustenance. Thus, the need to heed the call for a strategic foresight. Slow, subtle and steady frameworks of geo-political dependencies for Energy need to be erected concretely, thus crafting future-readiness for actors-players. The planet can no longer be a place of sequestered existence. In an amorphous criss-cross of global linkages, severance requires calculative cost-optimisation. Subjectively speaking, creating self-reliance will build in resilience but not necessarily isolation from the butterfly effect.
Energy surreptitiously conceals its divisive nature by acting as an instrument to forge strong associations and furthering human development. This in no way alters its true potential of generating heat, it is only the application for which this heat is used that creates the clandestine distinction. The era of choosing clear sides and concerted acts of unity maybe bygone, given the geo-political reality of transient dynamics, rather, ambidextrous organisational skills are a pre-requisite. The countries whose energy security is at the core of their economies and have high stake in the ongoing fracas, they are already navigating uncharted terrain of turbulence. The rise of the ‘Ruble’ may simply take out the wind from their sails. Contesting economics, is this the new Russian Chessboard of Putinomics?
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.