Ruble’s Strength in Face of Sanctions May Be Illusory
April 06, 2022 2:02 PM
Rob Garver
After a sharp plunge in value at the beginning of the war in Ukraine, the Russian ruble has recovered much of its value against other world currencies, a change made possible by aggressive capital controls put in place by the government in Moscow and a continual stream of payments for the country’s oil and gas exports.

The ruble’s resilience in the face of sanctions may make it easier, at least temporarily, for the regime of President Vladimir Putin to claim a measure of victory over international efforts to turn his government into a pariah. However, the practical effects of the ruble’s recovery may be limited for ordinary Russians, who remain largely cut off from global markets.

Also, as evidence of Russian troops’ brutal treatment of Ukrainian civilians accumulates, and Western governments take further steps to wean themselves off Russian energy, the Kremlin’s ability to protect its currency may weaken.

“I think the natural next step and a big set of questions is around energy revenues,” Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, told VOA.

She added, “As the images of atrocities on the ground continue, the pressure to do more is going to increase.”

Surprising recovery

One week before Russia launched its invasion of Ukraine, the ruble was worth about 1.3 cents in U.S. currency, meaning that it cost a little over 76 rubles to buy one dollar. By March 7, after governments around the world announced a range of painful sanctions on the Russian economy, the value of the ruble had fallen by nearly half. That day, a ruble was worth 0.7 cent, meaning that it cost almost 143 rubles to buy one dollar.


The expectation among many in the early days of the war was that the ruble’s loss of value was going to be a long-term problem for the Russian economy. Crucially, most of the Russian central bank’s foreign reserves — funds denominated in foreign currencies and held at banks outside Russia — were frozen. This left Moscow without the option of driving up the price of the ruble by buying it on the open market with dollars, euros and other foreign currencies.

In fact, the Russian government and its central bank took several steps that drove up the price of its currency. As of Tuesday, the ruble was worth approximately 1.2 cents, meaning that it now costs about 84 rubles to buy a dollar — a far cry from the 143 rubles required just a month previously.

“The Russian central bank more than doubled domestic interest rates to 20%. And they also put in place capital controls — that is, they limited the ability of Russian individuals to buy foreign exchange,” Gian Maria Milesi-Ferretti, former deputy director of the research department of the International Monetary Fund, told VOA.

Milesi-Ferretti, now a senior fellow at the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy, said another key factor in restoring the ruble’s value has been a new restriction on Russian exporters.

All Russian businesses still able to sell goods internationally are required to take foreign currency earned from those sales and transfer it to the Russian central bank in exchange for rubles.

This creates a steady demand for rubles, keeping the price high, and gives the Russian central bank a new source of foreign currency.

Dubious future

But the price of the Russian ruble in currency markets does not tell the full story of the impact sanctions have had on the Russian economy in general, and on the lives of ordinary Russians in particular.

“Russia's economy, by virtue of the sanctions and the coping mechanisms the central bank has employed, has become much more an internal economy, a smaller economy,” Ziemba, of the Center for a New American Security, told VOA.

“It's important to remember that Russians who used to be able to use their credit cards to purchase goods abroad in the U.S. and Europe, can't,” she said.

This is in part because banking restrictions have made it impossible for most Russian banks to hold correspondent accounts in banks outside the country, which facilitate international payments. Also, inside Russia, major payment systems such as Visa and Mastercard have stopped processing cross-border transactions.

“So, there is difficulty in actually buying goods, both from a financial perspective, but also because a lot of companies have basically said — even if the trade is legal — they don't want to do transactions with Russia,” Ziemba added. “The ability to actually use these assets is significantly limited.”

Energy wild card

One thing that remains uncertain is the extent to which Western governments, particularly in Europe, will be willing to stop purchasing oil and gas from Russia. Currently, Russia is running a large current account surplus, meaning it is exporting far more than it is importing.

In recent days, European leaders have proposed a ban on Russian coal imports and have floated the possibility of sanctions on Russian oil as well. Russian natural gas, which makes up a large percentage of the fuels used across Europe, does not appear to be on the chopping block.

Major action against Russian energy exports could significantly damage the Russian economy, but it is unclear that Western governments are prepared to take that step.

“We’re going to have to see how the war evolves, how expectations evolve,” Milesi-Ferretti said. “Everything is shrouded in uncertainty.”

Source: VOA

Na Government be this

Economic warfare is interesting

When the Ruble was weak due to sanctions, it was not illusionary. Now that it has had a V shape recovery, it may be illusionary. I now believe the problem with the west is cognitive dissonance.

I have a strong conviction that the recovery is just for a while.

Meanwhile the Ruble to Euro is now below 80

First it was US dollar

Now even much stronger Euro has fallen for Rouble yakata

Everybody to turn economic analysts and trade expert untop of Russian Rouble miraculous comeback

When you have capable hands at your central bank and your decision making and thought process are not beclouded by emotions


The poster above me said the recovery is not for a while

Wait until it hits US$ to Rouble 40 then everybody eye will clear

Maybe it’s time Nigeria and all oil producers need to start asking in their own Currency.
Saudi Arabia caused all this nonsense when they agreed to Petrol-Dollar because the house of Saudi need use a protection.

rottennaija:
When the Ruble was weak due to sanctions, it was not illusionary. Now that it has had a V shape recovery, it may be illusionary. I now believe the problem with the west is cognitive dissonance.

What do you expect when all they think in the west now is cuck, transgender, pansexual... Education systems are wack.. They still trying to find Russia weakness and they cannot.

Drenimarcus:


What do you expect when all they think in the west now is cuck, transgender, pansexual... Education systems are wack.. They still trying to find Russia weakness and they cannot.

I just they say the nonsense in the US. The US is going down. The empire is done for.

They will say anything to make a Russian gain look impossible. Why is it difficult for the west to come to reality that the cards won't always play in their favor?

rottennaija:


I just they say the nonsense in the US. The US is going down. The empire is done for.

I swear, several states are now allowing kids to be taught transgender and shit... The west is fast turning into a cesspool.

rottennaija:


I just they say the nonsense in the US. The US is going down. The empire is done for.

History is always repeat itself. The fate of ussr is awaiting Russian federation.

joyandfaith:


History is always repeat itself. The fate of ussr is awaiting Russian federation.

Keep dreaming. Which history has repeated itself?

rottennaija:

Keep dreaming. Which history has repeated itself?

History of how ussr collapsed!!! It wouldn't happen suddenly. It will be gradual.

joyandfaith:


History of how ussr collapsed!!! It wouldn't happen suddenly. It will be gradual.

joyandfaith, you said "History is always repeat itself". I asked you, give an example of history that repeated itself.

rottennaija:


joyandfaith, you said "History is always repeat itself". I asked you, give an example of history that repeated itself.

History of how ussr collapsed!!!

joyandfaith:


History of how ussr collapsed!!!

So did it repeat itself? Where?

rottennaija:


So did it repeat itself? Where?

It will always repeat itself. Just wait for it.

Internal and artificial controls are a temporary fix that they can not sustain, even how long do you keep denying your own people the ability to o what they want with their money.

When you forcefully take away foreign exchange earnings from your manufacturer in favor of the rubble, how then do you expect them to fund imports/raw materials?

Russians today are not n control of their own money because the government is playing hide and seek with the rubble when in fact it doesn't matter how you cut and dice the rubble, the problem is still there and it won't go away, in fact, it's going to get worse.

There's a reason why you are doing these financial acrobatics and manipulations to start with, that reason is about to get worse and more critical, starting next month, China won't accept Russian oil and gas because of the sanctions.

The hundreds of multinationals that left because of the sanctions are definitely not going to be paying taxes, no new investments, no FDI, no disposable FX to fund imports including food and medicine.

The pain is not here yet so it's easy to manipulate and do internal controls to make your money look good, but the money is about to dry up. then what?

Russia is in deep deep trouble, many times more trouble than North Korea..

Manipulating the Rubble is the least of your worres..

The only illusion is that Ukraine is claiming it is winning !

Ehn!

All these destruction in and all Ukraine is wetin?

Paradise?

baralatie:
The only illusion is that Ukraine is claiming it is winning !

Ehn!

All these destruction in and all Ukraine is wetin?

Paradise?

That was how Stalingrad was destroyed by nazi Germany.
No party actually win war. All parties are losers.

joyandfaith:


That was how Stalingrad was destroyed by nazi Germany.
No party actually win war. All parties are losers.

Unfortunately Russia was the one that obliterated Berlin in Germany and over threw the Nazi Germans from the least to the highest!

baralatie:

Unfortunately Russia was the one that obliterated Berlin in Germany and over threw the Nazi Germans from the least to the highest!

Allied forces did

joyandfaith:


Allied forces did

Which allied country stepped it's foot on German soil to bombard Berlin on the day the Russia army march in to victory?

baralatie:

Which allied country stepped it's foot on German soil to bombard Berlin on the day the Russia army march in to victory?

USA

joyandfaith:

USA

USA was not even anywhere near

baralatie:

USA was not even anywhere near

Read, pls. You can Google bombing of berlin and Germany cities during ww2.

joyandfaith:


Read, pls. You can Google bombing of berlin and Germany cities during ww2.

Go and update yourself on who marched into Berlin abeg!
If you are not aware

baralatie:

Go and update yourself on who marched into Berlin abeg!
If you are not aware

Marching into Berlin was different from aerial bombing of Berlin and German cities from 1940 till end of war. Read more!!

joyandfaith:


Marching into Berlin was different from aerial bombing of Berlin and German cities from 1940 till end of war. Read more!!

Who matched into berlin

baralatie:

Who matched into berlin

Red Army marched to Berlin while UK, USA Air forces were bombing Berlin and other German cities from 1941 till end of war. Google s bombing of Berlin will help you. USA and other allied need not to occupy east Germany and Berlin because agreement had been made between allied nations how Germany would be divided after the war.

joyandfaith:


Red Army marched to Berlin while UK, USA Air forces were bombing Berlin and other German cities from 1941 till end of war. Google s bombing of Berlin will help you. USA and other allied need not to occupy east Germany and Berlin because agreement had been made between allied nations how Germany would be divided after the war.

Now you are coming round
Now how did the red army matched into berlin and what were those events!