It has been more than a month since the conflict between Russia and Ukraine, and the United States and its allies have imposed sanctions and suppression on Russia in various aspects. The Russian currency was once under pressure, but following experiencing a historic collapse, with the support of energy exports and strict capital controls, it has recently successfully reversed rebounded. U.S. Treasury Secretary Yellen worries that sanctions might fuel inflation.
According to Agence France-Presse’s report on April 8, from the end of February to the beginning of March, the exchange rate of the ruble fell into a free fall, but following falling to a new low of more than 140 rubles once morest the US dollar on March 7, the ruble bottomed out and began to strengthen. And on Friday (April 8), it reached 71 rubles to the dollar, nearly doubling the bottom and hitting a new high since the fall of 2021. Today, the dollar is 80.25 rubles. Meanwhile, 77 rubles per euro was also the highest level since June 2020.
When the ruble fell in late February, Russia’s central bank urgently doubled its benchmark interest rate to 20 percent to shore up the financial system, the report said. On April 8, Russia’s central bank unexpectedly cut interest rates to 17 percent, saying risks to financial stability “have stopped increasing”.
“It is clear that the Bank of Russia assesses that the Russian economy is now emerging from the worst of the crisis and no longer needs such a restrictive currency,” said Liam Peach, an economist at Capital Economics. condition.”
Sofia Donets, chief economist at KfW, also said that the ruble’s recovery was driven by an unprecedented trade surplus amid high energy prices. “Russia’s imports are down, while exports are strong, and combined with high commodity prices, the trade surplus is expected to hit a new high of $20 billion to $25 billion in March,” she said.
The report revealed that oil and natural gas, Russia’s main export products, continued to flow abroad in large quantities, with the proceeds filling Russia’s treasury.
The New York Times website also reported on the same day that the U.S. Treasury Department has been formulating punitive measures aimed at severely damaging the Russian economy. The restrictive measures are equivalent to launching an economic war once morest Russia, but it remains to be seen whether the measures will work.
So far, Russia has been paying down its debt, the report said. Currency controls imposed by the Russian central bank and Russia’s subsequent moves to stabilize the use of rubles for energy exports from Europe and elsewhere have allowed Russia to replenish its coffers with more dollars and euros. This casts doubt on the effectiveness of punitive measures.
The U.S. does not depend on Russia for energy, but the ruble rebounded, underscoring that President Biden’s claim that sanctions would turn Russia’s currency into “waste paper” became empty talk. To what extent can sanctions be imposed without the unintended consequences of disrupting the financial system and fueling inflation?
U.S. Treasury Secretary Yellen expressed concern regarding measures that might fuel inflation, while former Assistant Secretary of State Daniel Fried quipped that when the ruble rebounds instead of being weakened by sanctions, people say, “Well, Get it, they failed.”
