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Due to outside countries refusing to sell their products to Russia, the demand forforeign currency in Russia actually fell. Moreover, the legal limitations on c

Due to outside countries refusing to sell their products to Russia, the demand forforeign currency in Russia actually fell. Moreover, the legal limitations on currency trade there means that the conversion rate is not true. This is why Russia wants payment for gas in rubles. If the conversion rate was true, they would convert the euros to rubles themselves. But instead they want Europe to pay for the difference.

HKH2 4y ago
> But instead they want Europe to pay for the difference. And they will pay, so why not? What other sanctions can be put on Russia?
nwatson 4y ago
"The conversion rate is not true" ... reminds me of when my dad traveled to Angola in the 1980s and there were currency controls in place. Government workers there would be paid in the local kwanza currency which at the official conversion rate would seem to be reasonable dollar-wise given local black market dollar prices for goods. However, nobody wanted kwanza at the official government rate, and instead a dozen eggs might cost a month's government worker salary at the real, unofficial conversion rate. To make ends meet a government worker would need to leverage their access to rare goods. To maintain the fiction of the official rate the government would offer a limited supply of rare goods (eg pharmaceuticals) to government workers in special commissaries. Workers would buy these supplies at the official government store kwanza rate and then sell them for dollars on the black market for their true local demand black market value. Then they could buy eggs for fewer hours of work. It was a very precarious, risky, and time consuming operation for these workers. Incidentally in 2017 Luanda, Angola, was the most expensive city in the world with a 2-bedroom flat renting for US$6800 monthly. Still inefficient.
Thorrez 4y ago
>Moreover, the legal limitations on currency trade there means that the conversion rate is not true. This is why Russia wants payment for gas in rubles. If the conversion rate was true, they would convert the euros to rubles themselves. But instead they want Europe to pay for the difference. I don't understand. Europe is paying for gas in rubles at face value. You say rubles are worth less than face value. So Europe is paying for gas at less than face value. That seems like it helps Europe, not hurts it.
- yostrovs 4y ago
  The rubble is worth less than conversion rate, so the buyer forced to convert at the conversion rate is getting a bad deal. He's paying more for a ruble that should be cheaper to buy.
  - Thorrez 4y ago
    Why is Europe forced to buy rubles at the official conversion rate? Why can't they buy them at the real rate? Even if Europe has to buy rubles at the official rate, I still don't see the problem. They use the rubles to buy oil priced using the official rate, so that just undoes the conversion.
    - yostrovs 4y ago
      The contracts were signed in euros. Rubles for sale on the market are controlled in large part by Russian entities. They've been artificially limited in making rubles available, driving up the price of the ruble.
      - Thorrez 4y ago
        If the contracts were signed in euros, then that's even better for Europe. The more the ruble goes up in value, the lower the oil price goes. E.g. if they signed at 1€/gal when €1=10 rubles, then rubles double in value so €1=5 rubles, the price of oil goes down from 10 rubles/gal to 5 rubles/gal.
StanislavPetrov 4y ago
~15% of the world's population is refusing to trade with Russia. The other ~85% has no such restrictions.
- yostrovs 4y ago
  Population numbers are irrelevant here. The countries refusing to trade with Russia supply the world's industrial technology, including parts such as chips, and systems such as what Siemens makes. Russia can't use central African industrial control systems to replace Siemens ones. They just don't make them in the Congo.

HKH2 4y ago

> But instead they want Europe to pay for the difference. And they will pay, so why not? What other sanctions can be put on Russia?

nwatson 4y ago

"The conversion rate is not true" ... reminds me of when my dad traveled to Angola in the 1980s and there were currency controls in place. Government workers there would be paid in the local kwanza currency which at the official conversion rate would seem to be reasonable dollar-wise given local black market dollar prices for goods. However, nobody wanted kwanza at the official government rate, and instead a dozen eggs might cost a month's government worker salary at the real, unofficial conversion rate. To make ends meet a government worker would need to leverage their access to rare goods. To maintain the fiction of the official rate the government would offer a limited supply of rare goods (eg pharmaceuticals) to government workers in special commissaries. Workers would buy these supplies at the official government store kwanza rate and then sell them for dollars on the black market for their true local demand black market value. Then they could buy eggs for fewer hours of work. It was a very precarious, risky, and time consuming operation for these workers. Incidentally in 2017 Luanda, Angola, was the most expensive city in the world with a 2-bedroom flat renting for US$6800 monthly. Still inefficient.

Thorrez 4y ago

>Moreover, the legal limitations on currency trade there means that the conversion rate is not true. This is why Russia wants payment for gas in rubles. If the conversion rate was true, they would convert the euros to rubles themselves. But instead they want Europe to pay for the difference. I don't understand. Europe is paying for gas in rubles at face value. You say rubles are worth less than face value. So Europe is paying for gas at less than face value. That seems like it helps Europe, not hurts it.

yostrovs 4y ago
The rubble is worth less than conversion rate, so the buyer forced to convert at the conversion rate is getting a bad deal. He's paying more for a ruble that should be cheaper to buy.
- Thorrez 4y ago
  Why is Europe forced to buy rubles at the official conversion rate? Why can't they buy them at the real rate? Even if Europe has to buy rubles at the official rate, I still don't see the problem. They use the rubles to buy oil priced using the official rate, so that just undoes the conversion.
  - yostrovs 4y ago
    The contracts were signed in euros. Rubles for sale on the market are controlled in large part by Russian entities. They've been artificially limited in making rubles available, driving up the price of the ruble.
    - Thorrez 4y ago
      If the contracts were signed in euros, then that's even better for Europe. The more the ruble goes up in value, the lower the oil price goes. E.g. if they signed at 1€/gal when €1=10 rubles, then rubles double in value so €1=5 rubles, the price of oil goes down from 10 rubles/gal to 5 rubles/gal.

StanislavPetrov 4y ago

~15% of the world's population is refusing to trade with Russia. The other ~85% has no such restrictions.

yostrovs 4y ago
Population numbers are irrelevant here. The countries refusing to trade with Russia supply the world's industrial technology, including parts such as chips, and systems such as what Siemens makes. Russia can't use central African industrial control systems to replace Siemens ones. They just don't make them in the Congo.