Russian President Vladimir Putin. Figure: flipping Putin’s Twitter (file photo)
Russia’s violation of Ukraine has been severely sanctioned by democratic countries, and the impact on Russia’s economy has gradually emerged. As the West imposed sanctions on the Russian banking system and froze its foreign exchange reserves, the ruble collapsed quickly at the start of the war, and then the Russian central bank raised interest rates sharply to 20%, and the ruble rose sharply back to the pre-war level, but economists believe that the ruble continues to rise. The performance of the appreciation may reflect that Western sanctions have finally succeeded in affecting the Russian economy.
According to a report by Business Insider in the United States, currency appreciation is often seen as a symbol of a country’s economic strength. Since the outbreak of the Ukraine-Russia war, the ruble has risen by nearly 40%. 60.28. However, Dmitry Dolgin, chief Russia economist at Dutch bank ING, said that Moscow’s economic policy is not always to allow the ruble to appreciate, but to focus on boosting local confidence and controlling capital outflows.
After Russian President Vladimir Putin ordered the invasion of Ukraine on February 24, the ruble fell to a record low once morest the dollar, and Moscow followed up with its anti-crisis plan, including a sharp rise in interest rates to 20% and liquidity for sanctioned banks , the ruble rebounded sharply from the bottom, but analysts pointed out that this may make the currency appreciate too high, and Dokin also warned: “It is good for the ruble to appreciate quickly back to the pre-war level, but it is very disturbing to continue to appreciate following that.”
“Business Insider” reported that citing data from the International Energy Agency, the appreciation of the ruble will erode Russia’s energy export revenue, which will hit the Russian economy, especially oil and gas account for regarding 45% of the Russian Federation’s budget, nearly half. In this regard, Craig Erlam, senior market analyst at foreign exchange broker ONANDA, said: “It has been found that the Russian central bank is cutting interest rates aggressively to ease monetary pressure.”
In addition, it was revealed that Moscow plans to buy up to 70 billion US dollars worth of renminbi and other “friendly” currencies to slow the rise of the ruble, but Dokin stressed that some of Russia’s foreign exchange reserves are still blocked by Western sanctions, and major banks have also been blocked. Exclusion from the SWIFT financial system greatly reduces Russia’s ability to find foreign exchange trading partners, which means that the sharp appreciation of the ruble may mean that the Russian economy is still affected by Western sanctions, because this is exactly the opposite of what Putin expected.
