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Putin demands other countries to pay Russia for its gas in rubles. He does this supposedly to strengthen the ruble.

I don't fully understand why this is important for Russia. Imagine they pay him in euros. As soon as he gets the euros he can exchange them himself to rubles right? What's the difference between this situation and the situation in which European countries pay in Rubles?

In my eyes the only difference is who exchanges euros to rubles: Russia or Europe. But that doesn't change anything to the strength of the ruble as the demand is the same.

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I don't fully understand why this is important for Russia. Imagine they pay him in euros. As soon as he gets the euros he can exchange them himself to rubles right?

Not exactly. First the money is paid to Russian oil companies that are not all nationalized. For example, Lukoil is private. Large international companies will often not convert all money they are getting to local currencies because typically local currencies are less stable and expose company to exchange rate risk.

Second, EU and US sanctions froze Russia's central bank's euro and dollar denominated reserves (see Bloomberg). Central bank is the bank country uses do its banking so when Russia gets dollars or euros they end up frozen. If Russia's central bank assets were not frozen then Russia could prop up their currency just by buying rubles with the large war chest of dollars and euros they have. Technically, they could convert currency still probably using the non-sanctioned Gazprombank but all dollars and euros are at the mercy of USA and EU.

Third there are probably non-economic reasons why this is done. For example, it could be show of power, like military parade.

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  • $\begingroup$ I'd like to add that, requiring buyers to pay in RUB ensures high demand for the RUB which alleviates the depreciation pressure. That's part of the reasons why EURRUB returns to pre-war right after the announcement. $\endgroup$
    – Art
    Apr 29, 2022 at 2:51
  • $\begingroup$ @Art you are right but that was already mentioned as a goal in the question $\endgroup$
    – 1muflon1 ♦
    Apr 29, 2022 at 7:16
  • $\begingroup$ @Art He could also do that by buying the RUB himself, which was the point of the question. $\endgroup$
    – user253751
    Apr 29, 2022 at 10:19
  • $\begingroup$ @user253751 no he can’t because his EUR USD are frozen as explained above $\endgroup$
    – 1muflon1 ♦
    Apr 29, 2022 at 13:15
  • $\begingroup$ @1muflon1 yes, that is the answer, which you have written. $\endgroup$
    – user253751
    Apr 29, 2022 at 13:40

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