Russian Rouble Gains, Reaches Pre-Conflict Levels Against US Dollar
Despite multiple U.S.-led efforts to "isolate" Russia from the international community following its self-proclaimed 'military operations' in Ukraine, the Russian currency and stock market seem to have "bounced back" from the initial lows following February 24th. Now, as a fresh round of sanctions are being proposed and Russia might possibly be expelled from the Human Rights Council over allegations against it for rights violations and "brutality" against civilians in Bucha, Ukraine.
The Russian rouble has gained 43% against the US dollar in one month, going from 139 roubles to the dollar on March 7th to 79.10 roubles today on April 7th. The increasing value of the rouble is on the back of revenues from natural gas exports to other countries that continue despite many rounds of sanctions imposed on Russia.
Bloomberg has forecast its earnings from energy exports to be $321 billion this year, up by more than one-third of that in 2021. In 2021, Russia earned $61.8 billion from piped and liquefied natural gas exports within its total exports of $489.9 billion. It had a historically high current account surplus of $120.3 billion, attributed to its energy sales. Russia’s Finance Ministry had also stated that its oil and gas revenues exceeded targets by 51% last year, totalling $119 billion.
Russian stock markets have also been rallying after the Moscow stock exchange was shut down on February 28th and restarted on March 24th. Since March 28th, the RTS benchmark has risen 32.75%, going from 824 to 1093.9 points today.
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Russian Currency Strengthening After Brief Sanctions Setback
The Russian rouble has recovered to its value against the dollar in the pre-conflict period and is presently trading at 98.21. Russia has mandated that Euros must be deposited in banks within Russian jurisdiction that will then convert them into roubles towards payment for natural gas. This was announced after more than $300 billion in Russian foreign reserves were frozen in Western banks, leading to a situation where Russia was effectively selling its gas ‘for free’.
Moscow has hinted that its other exports, such as wheat, nickel, aluminium, enriched uranium and neon, will also be linked to mandatory rouble payments in the future. Other than this, the government introduced capital controls to prevent a collapse of the currency and the economy.
On March 25th, Russia’s Central Bank, the Bank of Russia, announced that it will purchase gold at 5000 roubles per gram from March 28th to June 30th, effectively linking the currency to gold in an attempt to stabilize it and maintain its credibility.
Russia enacted strict capital control measures to stabilize the currency as well. Foreign traders were blocked from withdrawing their investments out of Russia, and exporters were told to convert 80% of their foreign currency earnings into roubles. Banks and entities have been prohibited from running cash-based currency exchanges for the short term.
Russians are unable to move money to their own accounts with foreign banks, and cannot withdraw more than $10,000 in international currencies over six months and also
prevented from taking an equivalent sum of roubles outside the country as cash. The Central Bank is offering interests rates of 20% to incentivize people into saving their money rather than parking it in foreign currencies.
Natural Gas, Russia’s Major Trump Card
Even as the United States has imposed an embargo on imports in Russian oil and gas, and the EU has announced a deal with the US for supply of LNG, Germany, a major European economy, has said that it will not “immediately” cut its natural gas supplies from Russia on which its industries and citizens depend.
Read | Nord Stream: Russia's Trump Card In Ukraine Standoff With US And NATO?
40% of Europe’s energy dependence is on Russia, and prpjects like the Nord Stream gas pipeline were being seen as a major Russian strategic leverage in the weeks leading up to the war.
The US has recognized other countries’ efforts, including India’s, to maintain their imports from Russia, whether in terms of natural gas, crude oil, and defence equipment, as essentially a circumvention of its financial sanctions. It has conveyed its displeasure with India’s neutrality and refusal to condemn Russia or cut business ties, and has offered to “replace” it as a primary source of arms with its own and that of its allies.
Bloomberg has forecast its earnings from energy exports to be $321 billion this year, up by more than one-third of that in 2021. In 2021, Russia earned $61.8 billion from piped and liquefied natural gas exports within its total exports of $489.9 billion. It had a historically high current account surplus of $120.3 billion, attributed to its energy sales. Russia’s Finance Ministry had also stated that its oil and gas revenues exceeded targets by 51% last year, totalling $119 billion.
Russian stock markets have also been rallying after the Moscow stock exchange was shut down on February 28th and restarted on March 24th. Since March 28th, the RTS benchmark has risen 32.75%, going from 824 to 1093.9 points today.
Russian Currency Strengthening After Brief Sanctions Setback
The Russian rouble has recovered to its value against the dollar in the pre-conflict period and is presently trading at 98.21. Russia has mandated that Euros must be deposited in banks within Russian jurisdiction that will then convert them into roubles towards payment for natural gas. This was announced after more than $300 billion in Russian foreign reserves were frozen in Western banks, leading to a situation where Russia was effectively selling its gas ‘for free’.
Moscow has hinted that its other exports, such as wheat, nickel, aluminium, enriched uranium and neon, will also be linked to mandatory rouble payments in the future. Other than this, the government introduced capital controls to prevent a collapse of the currency and the economy.
On March 25th, Russia’s Central Bank, the Bank of Russia, announced that it will purchase gold at 5000 roubles per gram from March 28th to June 30th, effectively linking the currency to gold in an attempt to stabilize it and maintain its credibility.
Russia enacted strict capital control measures to stabilize the currency as well. Foreign traders were blocked from withdrawing their investments out of Russia, and exporters were told to convert 80% of their foreign currency earnings into roubles. Banks and entities have been prohibited from running cash-based currency exchanges for the short term.
Russians are unable to move money to their own accounts with foreign banks, and cannot withdraw more than $10,000 in international currencies over six months and also
prevented from taking an equivalent sum of roubles outside the country as cash. The Central Bank is offering interests rates of 20% to incentivize people into saving their money rather than parking it in foreign currencies.
Natural Gas, Russia’s Major Trump Card
Even as the United States has imposed an embargo on imports in Russian oil and gas, and the EU has announced a deal with the US for supply of LNG, Germany, a major European economy, has said that it will not “immediately” cut its natural gas supplies from Russia on which its industries and citizens depend.
Read | Nord Stream: Russia's Trump Card In Ukraine Standoff With US And NATO?
40% of Europe’s energy dependence is on Russia, and prpjects like the Nord Stream gas pipeline were being seen as a major Russian strategic leverage in the weeks leading up to the war.
The US has recognized other countries’ efforts, including India’s, to maintain their imports from Russia, whether in terms of natural gas, crude oil, and defence equipment, as essentially a circumvention of its financial sanctions. It has conveyed its displeasure with India’s neutrality and refusal to condemn Russia or cut business ties, and has offered to “replace” it as a primary source of arms with its own and that of its allies.
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