A first in a year: the Russian currency crumbled to 80.50 rubles per dollar on Wednesday April 5, which had not happened since mid-April 2022. A lowest level reached which is explained in particular by the fall in Russian income from its exports from Moscow.
Energy and mining products account for more than half of Russia’s exports. However, exports of petroleum and petroleum products fell by 19% in February compared to January and by 42% compared to last year at the same time, according to the International Energy Agency (IEA). Russia thus received 11.6 billion dollars from these deliveries.
The effect of Western sanctions
Oil is, for the most part, bought in dollars, which Russia then converts into rubles, which supports its currency. But since volumes have fallen little, the decline in oil export revenues is mainly attributable to the sanctions imposed by the G7 and the European Union, in particular the price cap mechanism on oil, according to the IEA.
Vladimir Putin also acknowledged this week that the international sanctions imposed on Russia might have consequences “negative” To ” middle term “ on the national economy. The Russian president had however until now, and since the beginning of his offensive in Ukraine, praised the adaptation of his economy to this new situation. But the collapse of the price of gas and oil makes fear the worst for the Russian economy within the Kremlin.
More and more capital transfers
The ruble’s plunge is also attributable to capital outflows for Janis Kluge of the German Institute for International Affairs and Security (SWP). These movements are linked to the continued exodus of foreign companies, according to a note from the Russian bank Sinara. Vladimir Putin, when he spoke this week, also called on the government and economic leaders to“ensure the rapid launch of new projects in manufacturing industries, especially in the production of high-tech products”a sector affected by the departure of many specialists abroad.
At the same time, imports are increasing and, with them, the foreign currency needs of companies sourcing from abroad, weakening the rouble, according to a note from Alor Broker.
Another factor explaining capital transfers: conversions into currencies of countries whose governments maintain close relations with Russia, primarily China, according to Sinara. In recent days, the volume of trading between rubles and yuan in Russia has equaled or even exceeded that of transactions between rubles and dollars, according to data published by the Moscow Stock Exchange (Moex).
The Moscow Stock Exchange has also been working for several months on the opening of exchanges between Indian rupees and rubles, India having significantly increased its purchases of Russian oil since the invasion of Ukraine.
A situation that might last
Many observers believe that the real challenge for the Russian economy will present itself in the coming months. “In 2023, there is no sign that Russia will benefit from additional revenues like last year via oil and gas revenues” which had exploded alongside rising energy prices, Alexandra Prokopenko, a researcher who previously worked at the Central Bank of Russia (BCR), told AFP.
However, Moscow has a vital need to keep its hydrocarbon revenues at a high level to continue financing its offensive in Ukraine, at a time when around a third of the annual federal budget is intended for military and security spending, according to official figures. . “The sanctions are not painless but the macro-economic balances are not threatened at this stage”, considers Arnaud Dubien, director of the Franco-Russian Observatory in Moscow.
“Russia can finance its war effort for another three or four years. (…) But it has already lost the equivalent of a decade of development since 2014 and there it might lose a second”, he believes.
The dollar recovers
Elsewhere on the foreign exchange market, the dollar recovered once morest the euro and the pound on Wednesday, despite a flurry of new US indicators deemed disappointing. Around 7:30 p.m. GMT, the greenback gained 0.43% on the single currency, to 1.0904 dollars, and 0.33% once morest the British currency, to 1.2457 dollars for one pound.
“A lot of operators are wondering what a slowdown (in the US) means for other economies,” explains Matthew Weller, of StoneX. “And the saying goes that when the United States coughs, the rest of the world catches a cold. So it might be supportive of the dollar.”
(With AFP)
