The contracts are in euro/dollars, what "paying in rubles" actually means is that Russian exporting company must sell euros for rubles immediately upon receipt, so that the euros can't be frozen via sanctions.
But they pay in euro to gasprombank and Russia is doing conversion on their behalf. It's a flex to say that EU is paying in rubles for propaganda, when they are not...
But isn't the end effect the same? End result is euros are being dumped for rubles by EU nations themselves.
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.
There is a difference. Russia is free to convert money as they wish, just as they could do in the past, nobody is forced to do conversion by themselves
What definition of strong are you using? Ruble (only one l) has historically been around 85:1 and now its ~60:1. (Rubles:Euros, i.e. 85 Rubles for 1 Euro)
The ruble is strong because imports have been cut in half due to sanctions, while exports continue unabated. Actually, Europe sends more money to Russia now than before the war.
They did that indeed, especially in the early days to avoid a complete collapse, but since then it's not the primary mechanism at stake.
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.
>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?
The answer is easy. They are going to claim the money from the reserves that were put on hold until the war ends.
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.
I dont think Russia cares about the reserves because they don't think they will ever see them again. Reparations could easily exceed the total reserve.
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.
I think that's not completely obvious how it works at the moment. Russia has unilaterally required payments in Rubles despite long-term contracts saying something else. Some smaller countries have refused and got cut of any deliveries. EU has generally declared not to pay in Rubles, but I don't know what e.g. Germany does at the moment. There is no realistic exchange rate for the Ruble because Western companies don't want to touch it and Russian companies have been forced to buy Rubles for most of the foreign currency they get.
Sanctions would be stop selling gas. Just saying look we have this contract, we want to continue with it, but we change the terms without asking sounds something else.
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.
>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.
Ok, I don't follow the details so closely, I assume you are correct.
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.