November 30, 2024

What's Up with the Ruble?


What's Up with the Ruble?

Over the past week, the Russian ruble has collapsed at its fastest rate since the spring of 2022 (the onset of Russia's War on Ukraine). Over just two days it lost 10 percent of its value against both the dollar and yuan. Since the beginning of September it has fallen 20 percent. Alexandra Prokopenko, a fellow at the Berlin Carnegie Russia Eurasia Center offered a convincing summary for The Bell. We summarize her article here.

What is going on?

The most immediate cause is the imposition a week ago of new US sanctions on more than 50 Russian banks, most notably Gazprombank, which had previously been the only large Russian bank that was not on the US blacklist. Some had expected that the US Treasury would issue Gazprombank a special license to service gas transactions, but that did not happen. This will now make it more difficult for Russia to receive income from raw material exports.

This problem was compounded by a decision the Kremlin made back in October, allowing exporters to only repatriate a quarter of their foreign exchange earnings, instead of half, as before. This staunched the supply of dollars and yuan, and has led to a ruble glut.

"Everyone is sitting in rubles, there is a ton of liquidity, but there is nowhere to convert it," a treasury employee at a Russian bank told Prokopenko.

Ruble Dollar Exchange Rate
Rubles Per Dollar ~ Lowest level since the start of the war

Add to this (1) changes that have occurred in the Russian currency market since the introduction of American sanctions against the Moscow Exchange, (2) limits on the fixed price Russia can charge for oil (due to sanctions), (3) the lack of non-raw-material sources for export revenues, and (4) increased costs of imports.

It’s a perfect storm aimed at weakening the ruble.

Plus, the federal budget is putting additional pressure on the ruble. Expenditures in the fourth quarter grew by R1.5 trillion, which poured more rubles in the system. This fuels inflation expectations and juices up demand for foreign currency as a way to preserve the value of one’s savings.

What can the Kremlin do?

Not much.

The National Welfare Fund (NWF), designed as a sort of rainy-day fund, is at an abysmally low $31 billion (and is worth even less when evaluated in real terms). Meanwhile, the Central Bank's main tool has been to refuse to purchase foreign currency on the domestic market, trimming demand slightly.

The reality is that the ruble is “doomed to volatility,” according to Prokopenko. Any serious intervention to stabilize it will be too costly, so authorities are most likely to just make “verbal interventions,” like reassuring people that exchange rates are merely psychological, or turning the screws on exporters and forcing them to repatriate more dollars.

As Prokopenko summarizes: “as long as the Russian economy depends on imports and sanctions are in place, the ruble is doomed to weaken. But, for political reasons, economic authorities cannot acknowledge the effect of sanctions.

 

You Might Also Like

Everything is Connected
  • October 15, 2022

Everything is Connected

We are all daily shaken and unsettled by the fire hose of bad news from Russia and Ukraine, and we all would love “something good, loving, and light from Russia to counterbalance the darkness, the senseless brutality, and the horrors perpetrated by Russian hands in Ukraine.”
Rubles for Rubble?
  • September 22, 2024

Rubles for Rubble?

The Russian state has given more than five billion rubles, or $56 million, to some 35,000 residents in Kursk who have lost property due to Ukraine's counterattack on Russian soil.
Ruble Rabble: The Kremlin's Grand Strategy
  • December 17, 2014

Ruble Rabble: The Kremlin's Grand Strategy

World oil prices are plummeting, the ruble is in free fall, the Russian economy is on the brink of a recession, inflation is climbing, and the Russian Central Bank’s benchmark interest rate has jumped to 17 percent. Meanwhile, President Putin still has popularity ratings in the 80 percent range and there is, seemingly, no panic in the streets of Moscow. What is going on? What is Putin’s game? 
Hard Times Ahead
  • April 29, 2022

Hard Times Ahead

One Russian economic official provides a grim forecast of Russia's economy in the near term.
Like this post? Get a weekly email digest + member-only deals

Some of Our Books

Dostoyevsky Bilingual

Dostoyevsky Bilingual

Bilingual series of short, lesser known, but highly significant works that show the traditional view of Dostoyevsky as a dour, intense, philosophical writer to be unnecessarily one-sided. 
Murder at the Dacha

Murder at the Dacha

Senior Lieutenant Pavel Matyushkin has a problem. Several, actually. Not the least of them is the fact that a powerful Soviet boss has been murdered, and Matyushkin's surly commander has given him an unreasonably short time frame to close the case.
Stargorod: A Novel in Many Voices

Stargorod: A Novel in Many Voices

Stargorod is a mid-sized provincial city that exists only in Russian metaphorical space. It has its roots in Gogol, and Ilf and Petrov, and is a place far from Moscow, but close to Russian hearts. It is a place of mystery and normality, of provincial innocence and Black Earth wisdom. Strange, inexplicable things happen in Stargorod. So do good things. And bad things. A lot like life everywhere, one might say. Only with a heavy dose of vodka, longing and mystery.
Woe From Wit (bilingual)

Woe From Wit (bilingual)

One of the most famous works of Russian literature, the four-act comedy in verse Woe from Wit skewers staid, nineteenth century Russian society, and it positively teems with “winged phrases” that are essential colloquialisms for students of Russian and Russian culture.
Turgenev Bilingual

Turgenev Bilingual

A sampling of Ivan Turgenev's masterful short stories, plays, novellas and novels. Bilingual, with English and accented Russian texts running side by side on adjoining pages.
The Samovar Murders

The Samovar Murders

The murder of a poet is always more than a murder. When a famous writer is brutally stabbed on the campus of Moscow’s Lumumba University, the son of a recently deposed African president confesses, and the case assumes political implications that no one wants any part of.
Murder and the Muse

Murder and the Muse

KGB Chief Andropov has tapped Matyushkin to solve a brazen jewel heist from Picasso’s wife at the posh Metropole Hotel. But when the case bleeds over into murder, machinations, and international intrigue, not everyone is eager to see where the clues might lead.
The Little Golden Calf

The Little Golden Calf

Our edition of The Little Golden Calf, one of the greatest Russian satires ever, is the first new translation of this classic novel in nearly fifty years. It is also the first unabridged, uncensored English translation ever, and is 100% true to the original 1931 serial publication in the Russian journal 30 Dnei. Anne O. Fisher’s translation is copiously annotated, and includes an introduction by Alexandra Ilf, the daughter of one of the book’s two co-authors.
Faith & Humor: Notes from Muscovy

Faith & Humor: Notes from Muscovy

A book that dares to explore the humanity of priests and pilgrims, saints and sinners, Faith & Humor has been both a runaway bestseller in Russia and the focus of heated controversy – as often happens when a thoughtful writer takes on sacred cows. The stories, aphorisms, anecdotes, dialogues and adventures in this volume comprise an encyclopedia of modern Russian Orthodoxy, and thereby of Russian life.
The Moscow Eccentric

The Moscow Eccentric

Advance reviewers are calling this new translation "a coup" and "a remarkable achievement." This rediscovered gem of a novel by one of Russia's finest writers explores some of the thorniest issues of the early twentieth century.
Marooned in Moscow

Marooned in Moscow

This gripping autobiography plays out against the backdrop of Russia's bloody Civil War, and was one of the first Western eyewitness accounts of life in post-revolutionary Russia. Marooned in Moscow provides a fascinating account of one woman's entry into war-torn Russia in early 1920, first-person impressions of many in the top Soviet leadership, and accounts of the author's increasingly dangerous work as a journalist and spy, to say nothing of her work on behalf of prisoners, her two arrests, and her eventual ten-month-long imprisonment, including in the infamous Lubyanka prison. It is a veritable encyclopedia of life in Russia in the early 1920s.

About Us

Russian Life is a publication of a 30-year-young, award-winning publishing house that creates a bimonthly magazine, books, maps, and other products for Russophiles the world over.

Latest Posts

Our Contacts

Russian Life
73 Main Street, Suite 402
Montpelier VT 05602

802-223-4955