Today, the Russian ruble has weakened significantly – 7-8% against the euro and dollar. This is quite substantial – even for an Emerging Markets currency.
I am generally very sceptical about shouting “collapse” every time economic news (often just rumours) comes out of Russia, and I would also emphasise that the ruble market is virtually non-existent.
Or rather, you cannot call your normal bank anywhere in the Western world and ask to buy or sell rubles. At the same time, there are, in practice, very significant restrictions on Russian companies’ and citizens’ ability to buy and sell rubles in the market.
For the same reason, it would be wrong to overestimate most movements we see in the ruble. However, at this precise moment, I don’t think we can ignore this movement.
The graph below shows the movement in USD/RUB over the past five years. When the curve rises, the number of rubles you can buy for a dollar increases. In other words, an increase is a weakening of the ruble.
If you zoom in a bit, you’ll see that the weakening of the ruble began (this time) around August, but the weakening really took hold around 21 November.
And on precisely 21 November, the US Treasury announced new sanctions against Russia focusing on Gazprom and the energy sector.
The sanctions hit Gazprombank with financial restrictions and asset freezes, limiting the bank’s transactions and Gazprom’s revenues.
Additionally, over 50 Russian financial institutions, energy companies and defence producers are affected by restrictions, while sanctions against officials and oligarchs include travel bans and asset freezes to increase pressure on the Kremlin.
Having said that, the Russian ruble – given the extensive capital and currency restrictions – doesn’t “just” automatically weaken.
This is by no means a freely floating currency. So in that sense, there is to some extent a “deliberate” devaluation of the ruble by the Russian authorities.
But it’s probably also a choice that couldn’t have been different, and in a time of clearly rising Russian inflation, a weakening of the ruble is hardly something that delights the broader Russian population.
‘Butter crisis widens’
And if you’ve been following news from Russia lately, there has been quite a focus on food prices in particular rising sharply recently – and in the Russian media, there have been plenty of stories about supermarkets around Russia starting to put locks on refrigerated displays because the extent of “butter theft” has increased dramatically.
These problems should furthermore be seen in light of the fact that Russia is militarily challenged. There are reports of very high Russian casualty numbers – particularly in the Kursk area, where Ukraine has occupied part of the Kursk region since summer, and where North Korean troops have apparently most recently been deployed in the fighting.
None of this strengthens Putin – and I particularly believe that the sharply rising food prices (and they will now rise further) will increase dissatisfaction with the situation.
But the question is as always – who will get the blame? Putin or the evil Americans and Europeans? Finally, I should warn against concluding that Putin is about to be overthrown any time soon.
We simply don’t know, but we can say that regarding Putin’s ability to finance his war of aggression, there are fewer and fewer means to do so day by day.
* Cartoon created with fal.ai/FLUX