11/12/2023 0 Comments Ruble priceWhile not a full-blown crisis, “this is the closest we came to a real economic problem since the start of the war,” Kluge said. Janis Kluge, a Russian economy expert at the German Institute for International and Security Affairs, said the ruble decline is “not very welcome” to the Kremlin. “The weakness was planned, but it’s overdone and they want to pull it back," Weafer said. It can tell major exporters when to exchange their dollar earnings into Russian currency. “They’ve tried to compensate for the drop in the dollar value of oil receipts with the weaker ruble, so that therefore the deficit in terms of spending could be contained and more manageable," Weafer said.Īmid sanctions and restrictions on moving money out of the country, the ruble exchange rate is largely in the hands of the central bank, Weafer said. The cap and boycott have forced Russia to sell at a discount and take expensive steps such as obtaining a fleet of ghost tankers that are beyond the reach of sanctions. The sanctions prevent insurers or shippers who are mainly based in the West from handling Russian oil above $60 a barrel. Exports - and thus the ruble - have fallen because Western allies have boycotted Russian oil and imposed a price cap on oil exports to non-Western nations. Sanctions are having an impact even if they are not collapsing the economy. It raised its key interest rate from 8.5% to 12% at an emergency meeting Tuesday after the ruble's fall was criticized by a Kremlin economic adviser. So the central bank is trying to cool off the domestic economy to lower inflation. Higher interest rates will make it more expensive to get credit, and that should limit domestic demand for goods - including imports. Inflation hit 7.6% over the past three months. And the ruble's weakness is increasingly being passed through to prices people pay. The International Monetary Fund said last month that it expects Russia's economy to grow 1.5% this year.Ī weaker ruble worsens inflation by making imports more expensive in Russian currency. That government spending, along with the willingness of India and China to buy Russia oil, is helping the economy perform better than many had expected. Companies must import parts and raw materials, while some government money winds up in the pockets of workers who buy imported goods. And importers have found ways to ship goods through nearby countries such as Armenia, Georgia and Kazakhstan.Īt the same time, Russia has ramped up defense spending, pumping money into companies that make weapons, for instance. Some trade has been rerouted to Asian countries that are not participating in sanctions. Meanwhile, imports have started to recover after nearly a year and a half of war as Russians find ways around sanctions. The country has been building its gold stockpile with the aim of it acting as an economic insurance policy for the country.But oil prices have dipped this year, and it's more cumbersome for Russia to sell its oil due to Western sanctions, including price caps on crude and oil products like diesel. Its holding of roughly 2,300 tons of the precious metal was recently valued at nearly $140 billion. Russia holds the world's fifth-largest gold stockpile. persons are prohibited from engaging in any transaction - including gold-related transactions - involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation," the Treasury Department said Thursday in its Frequently Asked Questions section about financial sanctions on its website. The beleaguered ruble has tumbled as the US and Western allies issue economic and financial bans on Russia for launching a war against Ukraine last month. The notice marks a setback for Russia's currency, which could be bolstered by sales of the country's massive gold stash. Gold transactions between Americans and Russia are prohibited, according to a US Treasury Department notice that cited executive orders signed by President Joe Biden.
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