Dividends and European firms seek clarity on Russian rubles for gas plan

Countries around the world do not like each other and although the world is global or many businesses are global there are still local disagreements. Some of the disagreements you may personally like, for example sanctions on Russia for invading Ukraine. Some you may not like, but governments of the day in the country can choose to make up and change the rules. When this happens businesses that operated well within the rules ask for clarity on what the rules mean and do not mean to normal business activity.

In an article by Kate Abnett and Francesco Guarascio of Reuters, companies involved with Russia are asking for clarity. Russia has massive amounts of oil and gas and is closer to Europe than another other producer and Russia has strong historical ties to Europe. It made very good sense to move Russian oil and gas to Europe to replace coal. The companies that import the oil and gas are companies based in various countries of Europe and in Germany about half the gas comes from Russia. This was good until Russia invade Ukraine and the world imposed sanctions on Russia.

Since then, the Russia President said he wants the bills to be paid in Russian rubles as opposed to Euros or American dollars. What does a business do? The European Union loves making policies, but as yet has not done so. If the company pays in rubles, does that violate the contract with the other currency? in the oil and gas world, contracts are signed for decades, for example Austria’s OMV has a contract till 2040 for Russian gas. What happens?

Linking to dividend paying stocks, often times investors want to buy utilities because they have the ability to pass on increased costs to consumers every year while still allowing for profits to be made and rewarding shareholders as well as pay capital costs. Something similar to sanctions throws a non expected event or black swan event. It happens to all companies and hopefully the war will be over sooner than later and business can resume to what they do best.

There are more questions than answers, till the next time – to raising questions.

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