Russian ruble rate at its lowest since the outbreak of war

This article was last updated on November 29, 2024

Canada: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…
USA: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…

Russian ruble rate at its lowest since the outbreak of war

Shortly after the invasion of Ukraine, things went very fast, with the rapid decline of the Russian ruble. After a few months the price recovered again. Until this week, with yesterday even a decline of seven percent in one day. The currency’s rate has not been this low since March 2022.

The main cause is a new sanctions package from the United States aimed at fifty banks. “The Russians managed to keep the ruble stable for a long time, but now it has fallen significantly for the first time. That is a bad sign for the Russians,” says sanctions lawyer Heleen about the Linden. Although the ruble recovered a bit today, she expects the currency to fall further.

On Wednesday, more than 120 rubles cost 1 euro; 115 rubles was equal to 1 dollar. The Russian national currency has lost almost a quarter of its value since the beginning of August. Sanctions, political unrest and the ongoing war in Ukraine are putting pressure on the ruble.

Panic situation

Russian newspapers are talking about a panic situation, says Over de Linden. “There has been a shocked reaction to the sanctions and there is unrest in the market.”

At a press conference in the Kazakh capital Astana, President Putin said there is no reason to panic and that the situation is under control. He points to oil prices and seasonal factors, among other things.

Correspondent Geert Groot Koerkamp

“There is no panic, but there is some unrest. You can see that mainly in the headlines. Everyone is going to feel it in their pockets. A weaker ruble means that inflation will rise further.

But there is also a downside. Income from exports of oil and gas, for example, will increase if the ruble loses its value against other currencies. That helps the government because domestic spending is done in rubles.”

The EU and the US have imposed sanctions on Russia since the start of the war in Ukraine. On November 21, American sanctions against about fifty Russian banks were added. “As a result, banks worldwide no longer trade with these Russian banks. This makes international trade more difficult for Russia.”

Although other banks do not have to follow US sanctions, they do so anyway. “Banks are afraid of losing their license or ending up on the sanctions list and therefore break cooperation with Russian banks,” says Over de Linden. In this way, American sanctions are having an impact on Europe and other parts of the world.

No dollars for gas

Gazprombank, which is considered a system bank, is also among the sanctioned banks. Countries that purchase gas from Russia pay in dollars through this bank. These transactions can no longer take place, even if countries wanted to. “Turkey still wants to purchase gas, but this measure has caused the country to encounter payment problems.”

America did not previously place Gazprombank on the sanctions list because Europe was dependent on Russian gas through pipelines. That dependence has now decreased. “That is why the sanctions have a lesser effect on the European energy market,” says Over de Linden.

The Russian central bank is considering raising interest rates again to stabilize inflation. Interest rates are already at 21 percent, the highest level since 2003.