ELI5: Why is Russia's requirement for oil to be paid in Roubles abnormal?

The Politicus
Aug 02, 2022 04:47 PM 0 Answers
Member Since Sep 2018
Subscribed Subscribe Not subscribe

There seem to be various stories of Russia cutting off various neighbouring and other Euro states from its oil over failing to pay for the oil in Roubles (this is independent of the Ukranian war and so on, I'd like to focus on the economic issue here rather than the paramilitary issue, if at all possible). The way this is painted in the media is that it is abnormal for Russia to require this, and it is an unreasonable endeavour for these countries to acquire Roubles to pay for the oil; consequently, Russia should accept other countries' currencies for its oil, and it should not be the other countries' responsibilities to acquire Roubles.

It is my understanding, from a rudimentary macroeconomic perspective, that it is more normal/common than otherwise, in international trade, for the importer to pay for goods in the exporter's currency. The reason being that the exporting company needs to pay their wages/labour/materials/R&D/shareholders/etc in local currency, not in the import country's currency. For example, if Google does business in the UK, Google needs to pay its SF employees in USD; paying them in British pounds doesn't help them, and Google's employees would be right to be mad if they were paid in Pounds. This, from my understanding, is the norm.

Now, given that the export country (Russia) uses Roubles as the currency, it should be normal and not newsworthy that the exporting company requires payments in Roubles.

  1. Why is this newsworthy?

  2. Is the only reason why this is onerous for the importing country the fact that the Russian economy has been locked down and Roubles aren't commonly available on the common forex markets, or is there something else here that I'm not aware of?

0 Subscribers
Submit Answer
Please login to submit answer.
0 Answers
Sort By:

  • August 2, 2022