by Summary:
Why might Putin have made this announcement? At least three key possible reasons come to mind, all related to well-known theoretical and empirical work in international monetary economics:Market segmentation, arising from obstacles to the formation of a unique global market with a single price for a product (in this case, gas), allows monopolistically competitive firms (such as Gazprom in this case) to operate pricing-to-market strategies by choice of the currency of pricing in international transactions for each such segmented market.A shift of the exchange-rate risk from Gazprom as exporter to its importer counterparties in the ‘unfriendly’ countries, which could potentially result in rising energy costs if the rouble gains value in a medium-to-longer run.As a consequence, the move
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Why might Putin have made this announcement? At least three key possible reasons come to mind, all related to well-known theoretical and empirical work in international monetary economics:Market segmentation, arising from obstacles to the formation of a unique global market with a single price for a product (in this case, gas), allows monopolistically competitive firms (such as Gazprom in this case) to operate pricing-to-market strategies by choice of the currency of pricing in international transactions for each such segmented market.A shift of the exchange-rate risk from Gazprom as exporter to its importer counterparties in the ‘unfriendly’ countries, which could potentially result in rising energy costs if the rouble gains value in a medium-to-longer run.As a consequence, the move
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Mike Norman considers the following as important:
This could be interesting, too:
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Why might Putin have made this announcement? At least three key possible reasons come to mind, all related to well-known theoretical and empirical work in international monetary economics:vox.eu/CEPRThe combination of these three factors, and especially the final one, might potentially enhance the international role of the rouble.
- Market segmentation, arising from obstacles to the formation of a unique global market with a single price for a product (in this case, gas), allows monopolistically competitive firms (such as Gazprom in this case) to operate pricing-to-market strategies by choice of the currency of pricing in international transactions for each such segmented market.
- A shift of the exchange-rate risk from Gazprom as exporter to its importer counterparties in the ‘unfriendly’ countries, which could potentially result in rising energy costs if the rouble gains value in a medium-to-longer run.
- As a consequence, the move could boost demand for roubles in international forex markets, in particular by forcing the West to allow gas and oil buyers a way to purchase roubles under the current sanction regime, and thus – presumably – a way for Russia and its central bank to sell those roubles.
Why paying in roubles for Russian gas and oil might matter
Alexander Mihailov