Monday, March 28, 2022

Those Tricky Russians

Russia is demanding that western Europeans pay for the oil they want in rubles.

Macroeconomically, Russia isn't that big. Depending on how you measure, it's roughly 5% of the world economy. 

Most international trade is conducted in dollars, euros, yen, and pounds. Some is also done in yuan, but it's a smaller proportion than China's share of trade. Little is done in rubles because the only place you can spend them is in Russia.

So, Russia needs a lot of dollars, euros, yen, pounds, and yuan. Few other countries need rubles, and therefore they don't have FX accounts filled with them.

My guess is that the backend of the story is that Russia will make compromises for buyers who are short of rubles. You know ... like we'll do the exchange for you ... as long as you bring dollars, euros, yen, and pounds in briefcases of unmarked currency ... that they can keep in embassies, safe deposit boxes, and numbered bank accounts around the world.

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