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Russia mulls over Bitcoin as payment for oil and gas

According to Pavel Zavalny, a high-ranking politician, Russia is considering accepting Bitcoin as payment for its oil and gas exports. “Friendly” countries could be permitted to pay in crypto or their own currencies.

Russian President Vladimir Putin indicated earlier this week that he wants “unfriendly” countries to buy Russian gas in roubles. The action is thought to be intended to strengthen the Russian ruble, which has lost nearly 20% of its value this year.

Following the invasion of Ukraine, sanctions implemented by the United Kingdom, the United States, and the European Union have put pressure on Russia’s rouble and risen the cost of living.

Russia, on the other hand, remains the world’s largest natural gas exporter. Mr Zavalny, the chairman of Russia’s State Duma’s energy committee, said on Thursday that the country is looking into alternate payment methods for energy exports.

China and Turkey, he said, were among the “friendly” nations that were not involved in the sanctions pressure. “We’ve been recommending to China for a long time that we convert to national currency settlements for roubles and yuan,” Mr Zavalny added. “It’ll be lira and roubles with Turkey. You can even exchange bitcoins,” Mr Zavalny continued.

Despite the hazards, analysts believe Russia would profit from accepting the popular cryptocurrency. “Unprecedented sanctions are having an immediate impact on Russia,” said David Broadstock, a senior research fellow at the Energy Studies Institute in Singapore. “There is a need to strengthen the economy, and Bitcoin is considered as a high-growth asset in many aspects.” However, he pointed out that Bitcoin’s value has fluctuated by as much as 30% this year. In comparison, the dollar has been trading within 5% of the euro. “Clearly, accepting Bitcoin creates significantly more risk in the transaction of natural gas as compared to other traditional currencies,” Mr Broadstock added. “Moreover, China is one of Russia’s most important ‘friendly’ economic partners, and Bitcoin is prohibited in China,” he continued. “This certainly limits the use of Bitcoin for payment.”

There are fears that Russian oligarchs would use virtual currency to circumvent sanctions. This has prompted the Ukrainian government, as well as US and European politicians, to request that all Russian users be barred from crypto-currency sites. However, many businesses have ruled this out. “Now that their currency has collapsed, some regular Russians are using cryptocurrencies as a lifeline,” said Brian Armstrong, CEO of cryptocurrency business Coinbase. “Many of them are likely to reject what their country is doing, and a ban would harm them as well,” he said.

Mr Putin’s remarks on forcing “unfriendly” countries pay in roubles sent the currency to a three-week high on Wednesday. However, many existing gas contracts are in euros, and it is uncertain if Russia will be able to change them.