By John Ikani
Russia is considering accepting bitcoin as payment for oil and gas exports in the face of stiffened sanctions from Western countries over its invasion of Ukraine.
In a news conference held Thursday, Pavel Zavalny, the chair of Russia’s Duma Committee on energy, said the country is willing to be more flexible with payment options when it comes to friendly nations like China and Turkey.
Zavalny said the national fiat currency of the buyer and top crypto Bitcoin were being considered as alternative ways to pay for Russia’s energy exports.
“We have been proposing to China for a long time to switch to settlements in national currencies for rubles and yuan,” Zavalny said in translated comments. “With Turkey, it will be lira and rubles.”
He didn’t stop with traditional currencies.
“You can also trade bitcoins,” he said.
At the time of filing this report, bitcoin was trading at 44K, up nearly 4% for the day, on such macro report.
Sanctions imposed by the UK, US and the European Union, following the invasion of Ukraine, have put a strain on Russia’s rouble and raised its cost of living.
However, Russia is still the world’s biggest exporter of natural gas and the second largest supplier of oil.
Analysts said Russia may benefit from accepting the popular cryptocurrency, despite the risks.
“Russia is very quickly feeling the impact of unprecedented sanctions,” said David Broadstock, a senior research fellow at the Energy Studies Institute in Singapore. “There is a need to shore up the economy and in many ways, Bitcoin is seen as a high growth asset.”
However, he noted that the value of Bitcoin has swung by as much as 30% this year. In comparison, the dollar has traded within 5% against the euro.
“Clearly accepting Bitcoin, compared with other traditional currencies, introduces considerably more risk in the trade of natural gas,” Mr Broadstock said.
“Moreover, one of the major ‘friendly’ trade partners for Russia is China, and cryptocurrency is banned for use in China,” he added. “This clearly limits potential for payment using Bitcoin.”
There are concerns that Russian oligarchs could be using virtual currencies to avoid sanctions.
This has spurred Ukraine’s government as well as US and European politicians to ask crypto-currency platforms to ban all Russian users.
But many firms have ruled this out.
“Some ordinary Russians are using crypto as a lifeline now that their currency has collapsed,” said Brian Armstrong, chief executive of cryptocurrency firm Coinbase.
He said: “Many of them likely oppose what their country is doing, and a ban would hurt them, too.”
On Wednesday, Mr Putin’s comments on making “unfriendly” countries pay in roubles drove the currency to a three-week high.
However, many existing gas contracts are agreed upon in euros and it is unclear if Russia can change them. The EU relies on Russia for 40% of its gas.
