16 MINUTES AGO
EU countries agree to not pay Russia roubles for gas
EU countries all agree that they will not pay Russia directly in roubles for their imports of gas, noting that the deadline for next payments was expected to be May 20, senior European Union officials said on Thursday.
“What we do know, and there is consensus on this from all member states, is that none is willing to pay” in roubles, the official told a news briefing, adding that the EU Commission did not have an overview of how many buyers have opened accounts for gas payments with Gazprombank.
This situation has me wondering why the opposition to paying in roubles? Wouldn’t a country want to dump their roubles now, assuming they have any? Why not pay in a currency that is nearly worthless?
Took quite a bit of digging but this is the best explanation I have found:
As a consequence, the move could boost demand for roubles in international forex markets, in particular by forcing the West to allow gas and oil buyers a way to purchase roubles under the current sanction regime, and thus – presumably – a way for Russia and its central bank to sell those roubles.
I read the (VERY long) article, or at least skimmed thru it.
I still don’t understand the problem.
If a currency is readily exchangeable, and you’re not expected to pay more for Russian gas or oil at a false exchange rate, how does this harm the buyer?
According to the article, a part of Vlad’s motivation could be in the theatrical aspect of creating international respectability of his lowly ruble. As good an excuse as any I guess.
Rubles are not readily exchangeable outside Russia.
and you’re not expected to pay more for Russian gas or oil at a false exchange rate, how does this harm the buyer?
That is the catch. Ruble fell to well under US 1-penny–until the mandatory payment-in-rubles program. Then the ruble returned to its former value vs the US $. Nothing prevents the Russian govt from setting the ruble exchange rate at a fixed amount per US$/UK pound/etc. So to BUY rubles you would pay (say) US $ per 2-3-4 rubles (not US $0.13 per ruble = 7 rubles/US $). China does this to some extent, but does allow a modest float within a preset target range (both buy AND sell).
Guess who profits at both ends of all transactions…
This situation has me wondering why the opposition to paying in roubles?
To defend the US dollar’s status as the world’s reserve currency. Saddam Hussein and Colonel Gaddafi were taken out for threatening the US dollar. Saddam wanted to sell oil in euros! Hung! Colonel Gaddafi wanted to introduce the gold dinar. Sodomized then murdered.
The Captain
watch out Vlad, you might get impaled…
If a currency is readily exchangeable, and you’re not expected to pay more for Russian gas or oil at a false exchange rate, how does this harm the buyer?
It doesn’t harm the buyer, it could help the seller by creating demand for their worthless currency.
But it would make more sense for Russia to take dollars, since a lot of their dollar assets have been frozen.
This situation has me wondering why the opposition to paying in roubles?
To defend the US dollar’s status as the world’s reserve currency. Saddam Hussein and Colonel Gaddafi were taken out for threatening the US dollar. Saddam wanted to sell oil in euros! Hung! Colonel Gaddafi wanted to introduce the gold dinar. Sodomized then murdered.
Not buying it, for a number of reasons. One is that most gas payments to Russia are already settled in Euros. The European gas companies get payments in Euros, and all their expenses are in Euros, so they need contracts denominated in Euros, and nobody wants a crap currency like rubles. They want to pay in Euros.
Even the Russians don’t want rubles in normal times because the have an extraction economy, and all the stuff they need to buy is denominated in dollars or euros. So they need something other than rubles to buy stuff. At the moment Putin is trying to prop up is failing economy so he’s desperate for people to buy rubles but as we’ve seen buyers don’t seem to be very interested in paying rubles.
And a number of other countries already accept payments for oil in something other than dollars:
In August 2018, Venezuela joined the group of countries that allow their oil to be purchased in currencies other than US Dollars, thus allowing purchases in Euros, Yuan(Petroyuan) and other directly convertible currencies.[3] Other nations that permit this include Iran.[12]
But they have the same basic problem as Putin, in that the stuff they want to buy is priced in dollars. So they need Yankee dollars. The Yuan works as well, but it is pegged to the dollar, so it might as well be a dollar.