Russia’s Gazprom May Say No To Dollars
When I see what’s happened to the U.S. dollar, I think of Rodney Dangerfield and him always joking “I don’t get no respect.” And according to Bloomberg this afternoon, the greenback took another one on the chin as Gazprom, the world’s largest natural gas exporter, announced it may start selling its crude and gas production in rubles rather than dollars and euros.
Alexander Medvedev, Gazprom’s deputy chief executive officer, told reporters in New York today that, “We are seriously thinking about selling our resources in rubles.” The gas giant’s chief financial officer, Andrei Kruglov, told the same members of the press that the switch would happen “sooner, rather than later.”
According to New York Times reference material on Gazprom:
What former General Motors president Charles E. Wilson said of his company – “what was good for our country was good for General Motors and vice versa” - could well apply to Russia’s Gazprom, the nation’s largest company. The line between state-owned Gazprom and the Russian state is often blurry. The monopoly’s primary activity is selling natural gas in Europe at market rates to subsidize energy prices domestically. Several board members wear two hats and also work in government; for example, Dmitri A. Medvedev, a first deputy prime minister, is chairman of Gazprom. Still, the company controls more hydrocarbon reserves than the country of Iraq. So when it opened to foreign investors earlier this year, the capitalization spiked over $200 billion. Gazprom produced 545 billion cubic meters of natural gas in 2004.
Bloomberg noted that the dollar has fallen 11% against the euro so far this year, which has reduced the value of exports by oil-rich nations and contributed to a 49% increase in crude oil prices. This announcement comes on the heels of the secretary general of the Gulf Cooperation Council saying last week that six Gulf Arab states will discuss a proposal next month to revalue their currencies against the U.S. dollar.
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November 30th, 2007 at 12:46 pm
The ruble is rock-solid. Why shouldn’t Gazprom re-denominate? Why lose on another country’s weak-currency strategy?
This does not have the possibly nationalist overtones of other Russian actions, but is one of many ripples of the U.S. policy.
Steve LeVine, author
The Oil and the Glory (Random House)
http://www.oilandglory.com
December 1st, 2007 at 2:54 pm
Steve, I remember as a graduate student in the mid-nineties, it was as if Russia and the former republics of the Soviet Union no longer mattered in international relations/foreign policy studies. The only time I heard anything from this part of the world was when someone voiced their concerns over the proliferation of the former U.S.S.R.’s nuclear weapons. The same goes for the entire continent of Africa. In my graduate studies, it was as if both areas of the world had been relegated to the role of spectators in global affairs. As the world’s thirst for natural resources has intensified, it appears perceptions have changed.
Thanks for the comment. I really like your blog and will make it a point to read “The Oil and the Glory.” I’ve always been fascinated by the topic of oil.