Why Russia Can't Pay Its Foreign Debt in Dollars Despite Receiving Dollars and Euros for Oil and Gas Sales

There is a common misconception that Russia should be able to pay its foreign debt in dollars, even if it receives dollars and euros from selling gas and oil to Europe. This misunderstanding stems from the nuanced nature of currency transactions, the economic context of Russia’s situation, and the limitations imposed by international sanctions.

Does Putin Fail to Pay His Foreign Debts?

Manybelieve that Putin fails to pay his foreign debts on time despite receiving dollars and euros from the sale of oil and gas. This is viewed as a strategic ploy to mislead the public and justify Biden's policies, which seemingly disregard the need for U.S. energy independence.

It's important to recognize that many Democrats no longer fully trust Biden, considering him a pathological liar who consistently shifts blame to others (such as Putin or Trump) rather than acknowledging his own mistakes.

Currency Conversion and Transactions

Foreign debts are typically settled through electronic means that facilitate immediate conversion between different currencies. These transactions are usually instantaneous, ensuring that the recipient of the funds receives the agreed amount in the preferred currency. Therefore, if a transaction is denominated in rubles, it can be swiftly converted into dollars or any other currency required by the debtor or creditor.

For instance, if a European buyer pays for Russian gas in rubles, the transaction is settled immediately. The ultimate currencies are of little concern to the seller, as long as the agreed-upon amount is transferred to their designated account. Most modern banking systems handle these conversions without any significant delay or complications.

The Issue Lies in the Lack of Money, Not Currency

The real challenge for Russia is not in the choice of currency for foreign debts. Rather, the problem lies in the scarcity of hard currency, a result of Russia's economic condition amidst war and sanctions. It is often pointed out that Putin’s invasion of Ukraine has significantly weakened Russia's economy, almost as much as global sanctions have.

Furthermore, the refusal or reduction in gas and oil purchases from European countries is contributing to the ruble's instability. Even if Russia could manage to make payments in dollars, the economic measures in place prevent it from generating the necessary funds to meet its debt obligations.

Conclusion

The issue at hand is not a deliberate evasion but a result of the financial constraints Russia faces due to the war and sanctions. While the choice of currency for transactions can be managed, the core problem is a lack of liquidity.

Understanding the complexities involved will help in forming a more informed and nuanced view of Russia's financial situation and the broader geopolitical challenges it faces.

Key Points

Instant Currency Conversion: Transactions are primarily electronic, allowing for immediate conversion between currencies. Economic Constraints: Russia's economic instability, mainly due to the war and sanctions, limits its ability to pay debts. Dependence on Hard Currency: The lack of hard currency, not the choice of currency, is the primary challenge.

In summary, the issue is not about Putin's willingness or unwillingness to pay debts but the broader economic and political context that makes it difficult for Russia to manage its financial obligations.