Quick Question on Petrocurrencies
Recently read a comment in the FT: "But the Russian state sells the oil in USD, while its costs are in RUB, - as the oil price goes down, so does the Ruble - so it impoverishes ordinary Russians who see massive inflation, but strengthens the government, pensions go up and patriots don't go on foreign holidays anyway." Need some help understanding this:
(1) Is RUB falling because, as oil prices decrease, there is less oil revenue (priced in USD) coming in, thus less demand for RUB per USD, and thus weaker RUB? If so, does this then assume constant demand for oil despite the price decrease?
(2) Does it strengthen the govt because they earn their money in USD, and thus are now "richer" because they can get more RUB per USD, while ordinary households will have to pay much higher prices for imported goods due to weaker currency?
Thanks for the help!
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