They have to pay in rubles, which are also strong vs euro
Once the euros are converted to rubles, it's unlikely they get converted back into euros somewhere else in the supply chain. As opposed to USD, which facilitates 87% of world trade.
That means net selling pressure on the Euro.
This is a great reminder that keeping your money afloat is not that hard as long as you can export. (For the record, what destroyed Venezuela comes from the fact that they needed to import light oil in order to process their heavy one. Once the sanctions cut the input flow, the output flow dried up pretty quickly and it was game over)
I don't think it will matter long, given the catastrophic failure of the Russian military (which is currently demilitarizing Russia pretty quickly, how ironic), but from the economics PoV it's still interesting to witness.
Indeed, thanks. Not a native speaker here, and I got everything mixed up with the early-war pun “the Ruble is going to rubble”
> What definition of strong are you using? Ruble […] has historically been around 85:1 and now its ~60:1. (Rubles:Euros, i.e. 85 Rubles for 1 Euro)
Yes, that means Ruble's purchasing power increased by 40% (one Ruble could buy you ~1.2 euro cent, and now it buys you ~1.7).
IF you had your money in Rubles last year, can buy 40% more of a product than if you had your money in Euros.
*not under sanctions.
They are buying rubles 10.75 RMB and selling at 12.5 RMB. They are selling USD add 674.
This gives 63 rubles to the dollar.
The fact is that major economic powers in the world have not signed onto sanctions and have access to both Russian and Western currency.
It is true that many parts of the West have lower need for rubles because of sanction, but if you I think that the entire Globe has frozen trade with Russia and trade in Russian currency, you are the one that has fallen for propaganda. They just no longer can use western exchanges to convert currency. See the link below.
https://www.google.com/amp/s/markets.businessinsider.com/new...
So far you have changed your position from you can't trade it at all to the spread might become incrementally worse if trade exceeds 700 million US dollars worth a week
Second, this exchange is in Russia. Can you actually move your "yuan" from that exchange to China or anywhere outside the country?
Unfortunately, Europe does not control the flow despite whatever legal arguments they can muster.
The contracts likely have clauses related to failures to deliver, and Russia will have little influence over how those clauses will be implemented.
Im sure there are plenty of clauses, but once you are at economic war with a country, the contracts don't matter. They aren't worth the paper they are printed on. Thats my point.
Russia says old contracts are void and has the gas. EU Can agree to new contracts or go without. They cant use the old contracts to make Russia give them gas on the original terms. What will they do if Russia refuses? sue them for breach of contract, sanction them, and seize their foreign reserves?
E.g. if Russia would continue with gas supplies, the money for gas would got into the locked accounts. After war would end, Russia would get locked accounts minus reparations. Now if Russia stops supplies, after war ends Russia will get locked accounts minus reparations minus penalties for the failure to deliver gas.
Plus, they aren't planning to leave Ukraine, so they aren't planning to get it back
Therefore the money is a sunk cost and not leverage. Therefore finical penalties don't matter.
The u.s. and Canada have a demilitarized border. This would be bad for the u.s. if we went to war with Canada. However, we don't plan to go to war with Canada, so we aren't basing our decisions on that outcome.
Your claim is essentially there's no line, or that there is not a spectrum or that that line is beyond any economic measures. But there's no proof of that, so the logic in your "proof" is circular because your proof predicates on you knowing exactly where the line is (or isn't), when the location of the line is the thing to be proven.
I am saying that it unlikely to be reached and my personal opinion is we are moving further from it not closer.
I'm also saying that Russia is not making decisions as if it will be crossed. They are doing the exact opposite, making decisions assuming that they will not be forced out and will not get the reserves back.
I don't think they would realistically get the foreign reserves back even if they left, so that isn't much of an incentive.
The US and EU have to much politically at stake to hand them back, even if they leave. It would be seen as letting Russia get away without consequences for the invasion.
Time will prove one of us wrong. In 5 years Russia will either be occupying Eastern Ukraine or not. They will either have control of the foreign reserves back or not.
It looks like Russia is also only accepting rubles for wheat [2].
This is the obvious and natural result from the sanctions. OF course they will not accept a currency they can not spend anywhere.
[1] https://www.russia-briefing.com/news/russia-insisting-paymen...
>The EU’s executive body told the EU governments in a closed meeting that the authorities were not preventing companies from opening accounts with Gazprombank and would allow them to buy gas in line with EU sanctions.
>The EU will get a taste of what this means as Russia is turning off the still-operating Nordstream 1 pipeline for ‘routine scheduled maintenance’ from next Monday, July 11th to July 21st.
[2] https://dailytimes.com.pk/962297/russia-imposes-ruble-restri...
Yeah, that's how sanctions work: unilaterally.
To make priorities clear: Attack war is a crime and Putin, his government, and army leaders belong to Den Haag and then into prison.
But every westerner continuing to drive their car, fly to holidays and other wasteful lifestyle activites makes energy prizes go up and pays for Russia's war. Europeans a bit more directly than Americans, but in the end we have a global market so nobody goes free of reponsibility. Nothing they will end up in court for (would be a miracle if even Putin did, Bush and Blair didn't for doing not too differently), but certainly morally wrong.
Haven't checked recently but a month ago or so it was said Russia earns more money for oil and gas than in February, despite the volume having decreased quite a bit.
This restriction has been removed couple of weeks ago. At first it was 80%, then 40%, now it’s gone.
Which Russian companies still have significant income in foreign currency? I thought trade has mostly stopped. Except for energy, but that is dealt with in a different way anyway as discussed above, because still excluded from sanctions from the West and the Ruble requirement from Russia.
Then there is of course China and India which seem to intensify trade. No idea what currency they pay in and whether the increase has already been significant during 4 months.