The military intervention in Ukraine, which Russian President Vladimir Putin ordered in February 2022, and subsequent Western sanctions against Russia are rocking the ruble. The Russian currency was strongly devalued after the "special military operation", as Russia calls it, but over the months and the intervention of the Russian monetary authorities it recovered. This summer it depreciated again and on August 14 it broke the barrier of 100 units per dollar.
The Central Bank of Russia explains the weakening of the ruble by the imbalance in the trade balance, that is, between export and import operations. The value of exports, he pointed out, has been reduced by a third since the second half of 2022.
In December 2022, the main Western countries imposed a cap of $60 on the price of Russian oil, the country's main source of foreign currency. Western sanctions significantly reduced hydrocarbon export earnings. Natural gas costs ten times less than last year.
But the drop also seems to be influenced by the political and military events surrounding the current conflict. In fact, the ruble has not stopped depreciating since the end of June, after the failed armed rebellion of the Russian mercenaries of the Wagner Group, led by the St. Petersburg businessman Yevgueni Prigozhin.
For now, the Central Bank of Russia sees no risk to financial and economic stability. But experts and observers believe that the Russian state will have to take steps to strengthen the national currency.
In an opinion piece for the Tass agency, Maxim Oreshkin, Putin's economic adviser, blamed the ruble's fall of more than 30% in 2023 on the policies of the Central Bank.
"The main source of the weakening of the ruble and the acceleration of inflation is easy monetary policy. The central bank has all the tools to normalize the situation in the near future and ensure that interest rates are reduced to sustainable levels," Oreshkin wrote.
The adviser assures that the Kremlin wants a strong ruble. "A weak ruble complicates the structural transformation of the economy and negatively affects the real income of the population," he said.
Before the war against Ukraine broke out, a dollar was exchanged for about 75 rubles. One euro, for about 85 rubles. This Monday, August 14, the fall already exceeds 101 rubles per dollar, 111 per euro.
Last year the fall was greater and reached 120 rubles per dollar on March 11, 2022. But the Russian currency recovered in the following months thanks to capital controls and increased export revenues.
Alexei Antonov, head of investment advisors at Alor Broker, explains to the RBK newspaper that for this period of decline to end it is necessary either for imports to stop falling or for the monetary authorities to take decisive steps. "Before these factors take place, we do not rule out that the exchange rate reaches 115-120 rubles per dollar," he warns.
Last week the central bank halted currency purchases by the Ministry of Finance to try to reduce volatility that way. But the effect was limited and did not translate into significant support for the Russian currency.
To stem its slide, Russia could reintroduce tighter capital controls. Another option could be to raise interest rates, but that would limit the potential for economic growth and mean higher borrowing rates for the government at a time when it has to continue financing its military activity in Ukraine.
