2023-08-14 16:48:15
Updated Monday, August 14, 2023 – 20:21
It breaks the psychological barrier of 100 rubles for each ‘green ticket’, something that already happened days ago in its comparison with the euro
A man walks in front of an exchange house in Moscow. EFE Directo last hour of the war in Ukraine
The war is sinking the ruble. The Russian currency is experiencing a black Monday today, breaking the psychological barrier of 100 rubles per dollar, all this despite the measures introduced by the National Central Bank to stop its devaluation. It is the lowest figure since the end of March 2022, when two weeks after the start of the war in Ukraine it fell to 120 rubles per US dollar on the Moscow Stock Exchange.
Against the euro, the ruble broke the three-digit barrier a few days ago, and today it has traded at 109.81 units per euro. 10 years ago they gave just over 40 rubles for every euro: the value of the Russian currency has more than halved. In many exchange houses in Russia the markers do not have three figures but only two, so at some point the ghostly scene of “00 rubles” appears.
“The calm attitude of the financial authorities towards the situation in the foreign exchange market leaves room for speculators to play against the Russian currency,” the Russian business daily Kommersant warned in the morning.
The main factor behind the fall of the ruble is the trade balance imbalance. The value of exports has fallen by a third since the second half of 2022. At first, the Russian authorities prevented the ruble from falling apart by intervening in the money market. Now it looks difficult to get the currency out of that hole. It has not even benefited from the price of the oila trump card that Moscow had managed to pull to its advantage.
The picture shows growing financial anxiety in the Russian economy, with fissures among top Russian officials over how to manage the situation. The Central Bank of Russia blamed the weakening of the ruble on falling export earnings and recovering imports. But the Kremlin’s top economic adviser, Maxim Oreshkin, has said on monday that lax monetary policy was to blame. Russia’s central bank raised interest rates last month to stem a nascent rise in inflation, but they have not been enough to stem the ruble’s slide.
Isolation and closure of markets
The new stumble of the Russian currency seems to have its origin in the turbulent month of June, when the head of the Wagner Group, Yevgeny Prigozhin, he led a failed armed rebellion against the leadership of the Ministry of Defence.
So far this year, the ruble has lost almost 30% of its value against the dollar. A trader at a large Russian bank told Reuters the market was confused: “Everyone is ready for the inflow of expensive oil revenue, but that seems to be still hanging on, and our regulators are somewhat indifferent, there is no nothing to trust.”
Only a few currencies, such as the Turkish lira and the Nigerian naira, are having a worse year than the Russian currency. The isolation and closure of markets is seriously damaging the country’s finances. Russia’s current account surplus – a key factor in fueling the budget and consumption – shrank 85% compared to the same period last year, central bank data showed last week.
“The exchange rate has a significant impact on the social rights of our citizens,” lamented the Russian senator Andrey Klishas on Telegram. “The Russian economy is interested in having a strong ruble,” confirmed the adviser Oreshkin, who recalled that “a weak ruble complicates the restructuring of the country’s economy.”
impact of war
During this year and a half of war the Russian economy has held up better than expected thanks to rising oil revenues and heavy government spending on all war-related production. In 2022 it contracted 2% and it is expected to end 2023 with minimal growth. With the debacle of the ruble, the cost of imports increases and so does the push for inflation. The central bank said last month that it expects inflation to rise to 6.5%.
The positive part for the government is that now it can earn more from its exports in foreign currency. But inflation and lack of confidence are two shadows that hang over the second half of the year in Russia.
According to The Wall Street Journal, the Russians have continued to move money abroad this year, with a steady flow rising to $1 billion after the Wagner riot in June. August is often a bad month for the ruble, as Russians who are able to leave exchange their rubles for foreign currency to finance vacations abroad.
The ruble debacle will not help Russia out of its worst shortage of manpower in decades: a ruble down makes it less attractive to immigrants, who come mainly from Central Asia to save and send money home.
Hope is set, in the medium term, on oil, the ‘soul’ of the Russian economy. Since the beginning of the month, Brent North Sea crude has been hovering above $85 a barrel. The discount of the main Russian barrel, that of the Urals, has decreased to its lowest level since March of last year, and its prices exceed the “threshold” of 60 dollars per barrel. The lag between high oil prices and the inflow of foreign exchange through export earnings is approximately two to three months. According to some Russian analysts, a positive impact on the ruble is likely to be felt in September or October.
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