Thread by @DEhnts

What will change if Russian energy imports have to be paid in rubles instead of euros?

A brief overview.
bloomberg.com/news/articles/…

When Gazprom, 50 percent of which is owned by the Russian state, sells gas to Europe, Gazprombank normally receives €. The energy suppliers pay in €, which their banks transfer to Gazprombank in the form of deposits in the Eurosystem (in Germany: Bundesbank).

Gazprombank can then be forced to exchange all € into rubles at the Russian Central Bank. Or only the state's 50% share can be exchanged for rubles. The creator of the ruble is the Russian central bank, which can create them indefinitely and free of charge.

Since the Russian central bank executes the payments of the Russian government, it does not need € or ruble revenues. When the government spends money, the banks' accounts with the central bank are increased. The whole thing runs digitally.

The advantage of this system is that the Russian government gets €, which it can spend on imports from the Eurozone or elsewhere, without the exchange rate changing much.

If Gazprom switches to payments in rubles, then Western European utilities will have to get rubles before they can buy gas. This creates additional demand for rubles. If € are exchanged for rubles, the ruble appreciates.

Much more important, however, is the effect that due to the increased demand for rubles, very many players will be willing to sell goods and services against rubles. Thus, the ruble replaces the € as a currency in international trade.

This allows Russia to pay for imported goods and services with rubles without the exchange rate collapsing. Economic stability increases, because a devaluation of the ruble generates inflation because imported goods become more expensive.

Ultimately, the Russian government is taking advantage of the fact that other countries are dependent on its exports. The central issue, therefore, is energy policy in Europe.