The Russian ruble has returned to its pre-war value despite Western sanctions on the country’s exports and financial systems. The currency hit 75.5 per dollar this morning, up from nearly 140 per dollar in early March when it plummeted with the latest sanctions imposed. Now it is trading around 83, so for the purchase of one dollar you now need 83 rubles against the 84.95 of February 24, the day of the Russian invasion of Ukraine, and the 139.7 recorded on March 7 at the moment of maximum weakness.
The Russian central bank strengthened the currency by raising interest rates to 20%, thereby encouraging investment in the ruble, and imposing capital controls. But the upward trend is also dictated by the hypothesis, not excluded by China, of using rubles or yuan in the trade of energy sources. Indeed, according to the Beijing Foreign Ministry, “market operators are free to choose the currency in bilateral agreements”.
In reality, the Russian currency had already experienced a first comeback in area 100 after the Kremlin’s threat to force European gas importers, such as Germany and Italy, to pay for their supplies from April 1 for Russian gas only in local currency and no longer in dollars and euros. Apparently Russia has planned to keep contract prices for gas exports to “hostile” countries unchanged, but the payment should be made in a ruble equivalent on a pre-agreed settlement day. Which is not clear.
An ultimatum that led Germany, which is heavily dependent on energy imports from Russia, to activate an early warning phase as part of an emergency plan that aims to protect the country from any possible reduction in Russian gas supplies. But there may be another reason behind the leap of the Russian uniform. In fact, the trend of the ruble / dollar cross has come quite close to the target exchange rate set by the Russian Central Bank for its purchases of physical gold on the market, which began on March 28th and will continue until June 30th. That is, 5,000 rubles per gram. So to move the Russian currency could also have been the green light to buy the yellow metal.
What a setback for the West, considering that the Russian banking system is partly excluded from Swift and that the Central Bank’s reserves have been frozen. But in the long run, the war in Ukraine and the sanctions passed by the United States and European countries will weigh like a rock on the Russian economy. The European Bank for Reconstruction and Development (EBRD) has, in fact, predicted an economic recession of 10% this year in Russia and in 2023 the recovery will be very limited, while Moscow’s international counterparts will reduce purchases of natural gas and oil. Russians.
On the other hand, in the case of Ukraine, the EBRD had previously predicted a 20% fall in GDP in 2022 which, however, could be an optimistic estimate. According to the chief economist of the EBRD Beata Javorcik, quoted by the Financial Times, although the Russian economy has suffered the blow of the sanctions “they will be able to manage this shock in terms of macroeconomic stability. What will really impact Russia is more growth: zero next year and very low in the long term “. (All rights reserved)

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