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Next Previous Politics rather than economic Russia's decision to sell VAT in rubles • CYPRUS • Political rather than economic decision of Russia to sell VAT to …
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“Politics rather than economics is Russia's decision to sell its gas only in rubles,” said Marios Christou, an economist at the University of Nicosia. rubles abroad so as not to be exposed to attacks on the exchange rate of the Russian currency against foreign currencies.
At the same time, Mr. Christou emphasizes that Cyprus is in a phase of stagnant inflation without yet being in recession as it is technically defined, while underlining the “huge political and economic uncertainty” that exists due to the situation in Ukraine.
< Asked to comment on Russia's decision to sell gas only in rubles, Christou said the reasons behind this move by Russia, which "may be trying to create a new situation and break the dollar monopoly. "
“It is a political move rather than an economic one to challenge the omnipotence of the dollar and the US,” he said.
“Once all Russian assets have been frozen, he wants to collect in Russia all the rubles that are abroad (in reserves at the Central Banks).”
“Russia is exposed to the existence of rubles abroad because they can (third countries) with a Russian currency placement in the markets further reduce the exchange rate of the ruble,” he said.
In addition, Mr. Christou said that in this way also Russia “shows a strengthening of its currency”, because otherwise and in economic terms, as he explained, it would be in Russia's interest to carry out its sales of gas with dollars, which is the “hard currency ».
He said a similar move had once been made by Iran, which “had asked to price its oil sales in euros when it lost much of its value in the US currency.”
goods are priced in US dollars hence Saudi Arabia has tied its currency to the dollar, so as not to be exposed to fluctuations in the US currency.
Russia's decision does not affect Cyprus
Asked what this move by Russia means for Cyprus, Mr. Christou said that the oil and gas markets of Cyprus “come from other destinations and not from Russia and will not affect us.”
He noted, however, that what affects Cyprus is that the devaluation of the ruble “makes it very expensive for Russian tourists”, as are the other European countries that trade with the Euro.
Otherwise, as he explained, “Turkey, which is a very competitive destination for us – and not only economically but also for other reasons – due to the fact that the Turkish currency is under pressure and devalued”, the exchange rate of the two currencies (Turkish lira and ruble) does not differ as much as the euro and ruble exchange rate.
As a result, Turkey is more competitive with Cyprus and other European countries, he added.
Stagflation and the Cypriot economy
Asked whether the Cypriot economy is facing a slowdown and stagnant inflation, Mr. Christou said that “we are in a stagnant inflation” but also a slowdown in growth, explaining that this happens when prices rise and there is inflation, but instead there is economic “Growth, there is a recession.”
“That is, the economy is not growing and at the same time inflation is being created,” he added. & nbsp;
“Technically we are not in a recession at the moment, but there is a slowdown,” he said, adding that “one can say that we are in a form of stagnant inflation in the sense that there is an increase in prices, but there is no increase in production.”
Stating that inflation is usually driven by an increase in demand, Mr. Christou stressed, however, that “at the moment there is no increase in demand but a decrease in demand and at the same time prices are rising, due to increase in production costs “.
“In other words, there is a paradox, which was first observed in the 1960s when the term stagflation was used,” he added.
It depends on many factors.
“At the moment there is huge uncertainty both politically due to the situation in Ukraine and economic, due to uncertainty about the economic consequences of the war,” he added.
He said that this uncertainty comes after the pandemic, while “at the same time there exists and lurks the trade war between the US and China for years”.
“continue to buy holidays in Cyprus as expected a month ago”, adding that another question is how long the war in Ukraine will last. & nbsp;
“All this is a puzzle which is difficult at this time “Let 's see where it will go”, he concluded.