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It’s astonishing how badly wrong the Guardian can get economics

So, why does Russia want to get paid in roubles?

In the aftermath of the Russian invasion the value of the rouble fell off a cliff. It fell from about 85 to the euro last year to 110 as the tanks rolled across Ukraine’s borders. Only an intervention by the Russian central bank it stood at 94.1 to the euro.

With the rouble trading at such low levels, Russian exports were going to bring in less money to subsidise state services and fund the war than previously expected.

Umm, no. If the rouble is lower then each $ is worth more roubles. So, a falling rouble provides more domestic cash from each unit of exports. And, if $ are accepted for exports then of course that export is worth the same in $ as it was before.

A higher valued rouble will not only bring in more cash,

They’ve managed to invert the relationship. Sigh.

it is also a matter of pride that trading nations are prepared to pay for Russian exports in the Russian currency.

Sure, that could be true.

A larger pool of roubles, generated by the demand from foreign countries and companies for Russian goods, would allow Moscow to challenge the US dominance, via the dollar, of global money markets,

The Russian economy is far, far, too small to get anywhere near to that. Plus, given that the entire point here is that the roubles get sent to Russia in payment, that means fewer roubles floating around outside Russia.

For instance, without access to dollars and euros via international exchanges, Russia is also proposing to pay the interest on its euro-denominated debts with roubles.

But Russia prints roubles. They can’t run out.

Sigh. But then this piece is by Phillip Inman. Inman is the economics editor of The Observer and an economics writer for The Guardian. That’s, umm, amusing, no?

12 thoughts on “It’s astonishing how badly wrong the Guardian can get economics”

  1. Bloke in the Fourth Reich

    Can you explain in short words why, economically, in terms of influence on the value of their currency, the Russian government cares whether they are paid in dollars or euros or rubles, or any other currency that is easily tradable in large volumes?

    In terms of the effect on currency value it surely makes no difference if Russia brings in a billion dollars or pounds or whatever, and sells those for rubles, or if they make their customer do the currency thing first?

    Is there some other thing behind this such as forcing market participants outside Russia to maintain an active market for rubles? What am I missing in terms of the effect on the currency value of forcing customers to pay in rubles rather than just selling dollars for rubles yourself?

  2. There is no particular reason. Dick measuring, perhaps – can we force folk to do this? – but nothing in standard economics, no.

  3. I don’t see how a Russian oil company could trade euros for existing roubles, unless the Russian government printed some roubles and then said we’ll exchange those.
    Either way some organisation in Russia is stuck with Euros they can’t spend ‘cos sanctions.
    So roubles are devalued, and we have rouble inflation. Unless I’m missing something.

  4. If the Kremlin insists current contracts in euros and dollars are changed to roubles, they will be in breach of international protocols

    Somebody should write them a sternly worded letter.

    Germany has said it is prepared to ration energy supplies rather than pay for gas in roubles, which is likely to plunge the EU’s largest economy into recession but deny Russia the extra cash.

    Crashing your own economy with no survivors to own the Putler.

    I doubt Germany will do it, but you’ve got to admire how masterfully the US, with Britain’s encouragement, has manipulated them into this position of putting transatlantic interests above their own interests. It’s their own damn fault, of course. Enjoy your Atomkraft Nein Danke, Fritz.

  5. Steve

    You forgot to blame it on Brexit and the Irish protocol, brainchild of Joe “genius” Biden

  6. The Meissen Bison

    BiFR – The only thing that occurs to me is if the USD is in general circulation within Russia among certain elements of the population, then a measure like this would reduce the number of dollars available to the kleptocrats and gangsters.

  7. It reminds me of a passage in a scifi story where I struggled to understand the economics. John Varley, Golden Globe. Hero has arrived on Pluto. The passage is something like:

    Pluto was in the grip of runaway inflation. I slipped a 10-Lunar note in a food vending machine. “Can’t change that” the machine intoned. “However, this vendomat is also a branch of the Bank of Pluto, if you open an account and deposit that note, we can trade”.

    I pressed OK. “Deposit accepted. Interest accrued over 30 seconds, 165 Plutons. Here is your sandwich, and your 10 Lunars returned. Thanks for your business”.

    I couldn’t quite work my mind around how that worked. Has the author got inflation and interest rates confused? Surely there would also be runaway currency deflation, so however much interest you accrued, it would be worth less in Lunars than you’d deposited in the first place?

  8. The Meissen Bison

    A one year fixed deposit with the Bank of Pluto would tie up your money for a very long earth time, wouldn’t it?

  9. Bloke in North Dorset


    Its nothing to do with economics and everything to do with forcing splits in the EU and even your host Reich. In order to pay in Roubles they have to break EU sanctions and from what I’m seeing Die Linke and even the SPD are starting to tear themselves apart of what to do with Russia and Russian gas.

  10. Dio – yes, but that was last week. This week we’re threatening the Chinee on Joe’s behalf.

    BiND – it’s obviously political, but maybe it’s practical too. The EU and US have “frozen”, i.e. stolen, $300 Bn of Russian government money held by Western banks. According to the FT, anyway. The Guardian claims $600Bn.

    If Russia sells gas in Euros, could that money also be “frozen”, somehow? Idk how that works. I assume that if they can steal over $300Bn, there’s probably some kind of fucketry possible when electronically transferring large sums of Western currency. But maybe I’m wrong.

    Also maybe worth asking why it’s very important to the EU to not pay its gas bill in roubles. Looks like they’re playing a game of chicken with their energy supplier, which probably won’t end well for anybody except American oil companies, the House of Saud and Chinese manufacturers.

    Something like this was bound to happen sooner or later thanks to Net Zero, we’re just getting a sneak preview of the future that retarded Swedish goblin’s promoters have planned for us. And maybe that’s for the best – the danger to the frog is mostly from being slow boiled.

  11. I thought the EU was trying to get away with not paying for the gas at all, by printing euros and paying them into the Western bank accounts of the Russian gas suppliers, which are sanctioned so the Russians can’t access their money, but the buyer has met the legal terms for payment. Hence the demand to pay in roubles into Russian accounts.

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