HACKER Q&A
📣 weinzierl

How is it beneficial for Russia to only accept payments in rubles


I cannot wrap my head around on why Russia is going to only accept payments in rubles for gas deliveries. I remember from the 80s that everyone in eastern Europe was keen on hard currency. How is the situation different now?


  👤 MatteoFrigo Accepted Answer ✓
Assume for simplicity that only two countries exist, Germany and Russia, and that all Euros are numbers in a computer. Crucially, the computer storing Euros is in Germany.

Up to a month ago, Russia could have shipped gas to Germany in exchange for "Euros", which means: Russia ships gas, and at the same time a number in a computer in Frankfurt goes up, reflecting the fact that Russia owns more Euros. Then Russia could go to a car dealer in Stuttgart and buy a Porsche 911 by spending Euros. Russia gets the Porsche and the number in the computer in Frankfurt goes down.

Now Germany is saying: the number in the computer is frozen. Russia cannot spend "Euros" to buy a Porsche. So Russia, understandably, says: These "Euros" are useless to me.

In this setup, no trade can happen anymore. The Euro is effectively worthless and the ECB has defaulted. As a compromise before things get worse, Russia is proposing an intermediate solution. First Germany sends the Porsche to Russia. To keep track of the transaction, a number in a computer in Moscow (a "Ruble") goes up. Later, Russia sends gas to Germany and the number in Moscow goes down to settle the balance. In order for this to work, the Porsche dealer or some intermediary must accept Rubles in exchange for the 911, and Germany must trust Russia not to freeze Germany's rubles (in which case Russia gets the Porsche for nothing and Germany is pissed).

How is this different from the '80s? First, many things in the 80's were done in physical bank notes, to which the "freezing" does not apply. However, the large amounts of gas trade make the exchange of physical bank notes impractical. Second, banks in the '80s would not have dared to freeze the money of their customers. Such breakage in the banking system is a new thing whose consequences remain to be seen.


👤 nabla9
Europe needs rubles to pay for the oil. Europe has no rubles.

1. In what currency Europe pays for the rubles?

2. Who gets the euros in this trade?

answers: ˙soɹnǝ sʇǝƃ ɐıssnᴚ (2 'soɹnƎ (1

Russia goes trough this extra step to create demand for rubles and stabilize the exchange rate.


👤 ghostwriter
It's a token of recognition that other parties do need your goods and services and hence are backing a currency of your issuing as a legal tender. The more parties are involved in the trade with the same currency the more transactional trust the currency gets (as non-issuing parties could credit one another in the same currency for future purchases of various kinds from the issuing party). You can ask yourself a similar question to get an intuition about the importance of the move: what's the difference between IRS accepting payments in Bitcoins or dollars vs. accepting only dollars?

👤 celticninja
You have to buy rubles with a proper currency like dollars, euros or beanie babies. Then Stalin, sorry Putin, has a hard currency he can use to buy tank parts and sugar.