With the rouble worth $0.013, why do the Russians insist that the gas they sell in Europe be paid for in roubles?
The actual exchange rate doesn’t matter in this case. Since Western companies that purchase natural gas don’t have a lot of rubles laying around they have to exchange Euros for rubles at a (presumably Russian) bank first and then pay. An extra layer of effort. The Russians are doing this just to be annoying, it seems.
Because if you NEED to have rubles to buy Russian energy, the Russian Ruble is worth more.
I used this example in another thread but think it works: If I had an arcade and both sold game tokens and let people use quarters. no one would ever buy a game token because a quarter has much more flexible value. If my games ONLY take tokens then my tokens become more valuable to anyone who wants to use my arcade. Even to someone who doesn’t want to use my arcade, if you found a token in the street, you’d at least think “I could sell this for a dime to a game player” versus “This is completely worthless”. Demanding rubles be used to buy Russian energy is Russia’s way of keeping the ruble from becoming completely worthless.
My understanding is that in order to pay in Rubles, you have to have Rubles. The only way to get Rubles is to buy them on the foreign exchange market. Since the payment would be quite large, such a large purchase of Rubles on the market would tend to drive up the price of Rubles, which would be to Russia’s benefit.
If you raise the number of rubles needed to buy a barrel of oil, the exchange rate doesn’t factor into it.
Thanks.
I considered that, but I didn’t realize it would help very much.
I would think that a dollar would be worth more to then than 77 roubles.
As a related note - it also normalizes Russia’s ability to unilaterally change the terms of it’s agreements on a whim, as many of the contracts specify payment in US dollar or Euros.
Which is probably at best a secondary objective, with propping up the ruble first, but not a unrelated one to Russia’s Imperial ambitions.
Prior thread on the exact topic, possibly was not found by OP because of the alternate spellings ruble/rouble.
Thanks, Riemann.
Unless you also print the rubles, then you have the dollar AND 77 rubles.
Just to add, some nations use their main currency as we use dimes or pennies. That doesn’t really change anything. Instead of paying $10, you are paying 1000 pennies. A rouble would be line a US penny, and prices would in general not have a decimal place like we do.
Exactly - AFAIK, the Japanese yen has never been worth more than 1 cent, but that doesn’t mean it’s not a strong currency.
I’ve never been to Japan, but I am exposed to a reasonable amount of Japanese media, and it seems as though I’ve never seen a 1 yen, or even 5 yen piece.
So, while a yen is similar in value to a penny, they seem to have been smart enough to get rid of that low a value coin.