The military offensive in Ukraine, which Russian President Vladimir Putin ordered in February 2022, and Western sanctions against Russia are shaking the ruble. The Russian currency collapsed after the “special military operation”, as Russia calls it, but then recovered after the intervention of the Russian monetary authorities. This summer it depreciated again and yesterday it passed the barrier of 100 units per dollar. The fall appeared to be slowing when the central bank announced an emergency meeting for today, where shock measures are expected.
The Central Bank of Russia explains its weakening due to the imbalance between export and import operations. In December 2022, Western powers imposed a limit of $60 on the price of Russian oil, the country’s main source of foreign exchange. Western sanctions have significantly reduced revenues from the export of hydrocarbons. Natural gas costs ten times less than last year.
But the decline also seems to be influenced by political and military events. In fact, the ruble has not stopped depreciating since the end of June, after the failed armed rebellion of the mercenary group Wagner.
The Central Bank of Russia sees no risk of financial instability. But experts and observers believe that the State will have to take measures to strengthen the national currency. In an opinion piece for the Tass agency, Maksim Oreishkin, Putin’s economic adviser, said yesterday that the Kremlin wants a strong ruble and blamed its depreciation, 30% by 2023, on a “soft monetary policy “. “A weak ruble complicates the structural transformation of the economy and negatively affects the real income of the population,” he wrote.
Before the war against Ukraine broke out, one dollar was exchanged for about 75 rubles. One euro, to 85 rubles. Yesterday the fall led the Russian currency to exchange at 101 rubles per dollar, 111 per euro.
Aleksei Antonov, an expert at Alor Broker, told the RBK newspaper that the fall will end when exports stop falling or the central bank takes decisive steps. “Before that, we do not rule out that the exchange rate will reach 115-120 rubles per dollar”, he warns.
Last week the central bank halted the Finance Ministry’s currency purchases to reduce volatility. But the effect was limited. Russia could reintroduce tighter capital controls. But the most likely option is to raise interest rates, as it did last year, when it set them at 20%. They are currently at 8.5%
This could happen today. The Central Bank of Russia called an emergency meeting of its board of directors yesterday, Monday. Immediately, the ruble began to recover its value and in the afternoon it was already exchanged at 97 units per dollar; 106, per euro. Earlier, its vice president, Aleksei Zabotkin, suggested that the regulator could raise the price of money in September.
