THREAD
The brilliance of Putin's "gas for rubles" order
First, the basics of how it works:
Customers from "unfriendly countries" must purchase natural gas from (state-owned) Gazprom in rubles. If the company doesn't have rubles on hand, it must set up an account at Gazprombank
The brilliance of Putin's "gas for rubles" order
First, the basics of how it works:
Customers from "unfriendly countries" must purchase natural gas from (state-owned) Gazprom in rubles. If the company doesn't have rubles on hand, it must set up an account at Gazprombank
As an example, a German company purchasing gas can fund their account with euros, but Gazprombank will immediately take that EUR and exchange it on the domestic currency market (Moscow Exchange) for rubles. Those rubles are what is available in the account to make the purchase
The brilliance of the decree is that it forces demand for rubles on the open market that previously did not exist *plus* it empowers Gazprom (majority owned by the Russian government) to set the rate at which it will do the exchange. We can bet theyll pay a premium for rubles.
Just based on pure FOREX arbitrage, the premium rate of rubles on the Moscow Exchange that will be the natural result of this action will drive the price of the ruble up against the dollar and euro on all markets worldwide.
This will surely expand to all Russian commodities.
This will surely expand to all Russian commodities.
The craziest thing about this is that the US and the Europeans did this to themselves. 🤯
#Dedollarization
#Dedollarization
Basically, these companies will get a better deal by going out and acquiring ruble reserves on the open global market than using the Gazprombank option. So, it's a win-win for Russia just purely based on incentives and profitotove of the companies buying gas.
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