The idea that Russia would sell oil in euros came out of a joint meeting between Russia and Germany. The idea was not Russia's alone, nor will it solely benefit Russia.
By using only euros to buy energy, europe benefits because it is shielded from currency risk (ie, a strong dollar/weak euro makes oil expensive). It also benefits because it can use it's local currency to exchange for oil.
This, in fact, is our advantage in the oil-dollar flow. We can create money and exchange it for oil, without having to go through the laborious process of actually producing goods and services to exchange for oil.
The advantage to Russia is obvious - it gets to exchange it's oil for a fiat which is appreciating, not depreciating. What is not so obvious is that this will also be a boon to European based oil companies, who have seen their profits hurt by a falling dollar.
A rapidly rising euro would hurt Europe, Germany especially. That is true. However, I can't jump to the conclusion that Russia pricing oil in euros will make the euro jump. It would seem that to buy oil in euros a huge new demand would be necessary and this would send the price of the euro up. However, the opposite problem is more likely.
As mentioned, the european bank, like all banks that play with a fiat currency, can simply create euros, it does not need to buy them. |
