Most read from Bloomberg International sanctions against Vladimir Putin’s regime plunged him to a record low of 121.5 rubles per dollar, sparking memories of the blow he received during the 1998 Russian financial crisis. Things seemed so tragic that US President Joe Biden said the ruble had been turned into “ruins”. Now, however, it certainly does not. The ruble has jumped to where it was before Putin invaded Ukraine, extending its recent rally to $ 74.2625 per dollar at the start of Moscow trade on Thursday. What has become clear is that despite the incredibly wide package of sanctions on the Russian government and its oligarchs, and the outflow of foreign companies, action is largely awkward if foreigners continue to consume Russian oil and gas – backing the ruble with stocks Putin’s funds. READ: Japan will not ban Russian coal imports, says Mainichi Although Russia remains largely cut off from the world economy, Bloomberg Economics expects the country to earn nearly $ 321 billion in energy exports this year, more than a third by 2021. The rapid recovery of the ruble has given Putin a major victory back in Russia, where many people are focused on currency fluctuations, even as his army wanders into Ukraine and anger rises around the world over the atrocities he has committed. “For politicians, it’s a good public relations tool, saying sanctions have no effect. And it will help reduce the impact on inflation, “said Guillaume Tresca, senior emerging market analyst at Generali Insurance Asset Management. The story goes on In the post-Soviet history of Russia, the ruble-dollar exchange rate has undoubtedly been the economic indicator that Russians are most interested in. The exchange rate was transmitted by the currency booths that sprang up in every city and town, signaling the collapse of the currency as hyperinflation erupted in the early 1990s. The ruble fell again after the bankruptcy of Russia in 1998. As soon as this chaos subsided, the government closed three zeros. Then, during the 2008 crisis, authorities burned billions of dollars to slow the currency’s slide, in part to avoid scaring the population and triggering a run-down in the country’s banks. Governor Elvira Nabiullina decided to risk it in 2014, when sanctions on Crimea annexation and the fall in oil pushed her to change currency to free circulation. In response to this year’s sanctions, Russia has introduced capital controls that also appear to support the ruble. This includes freezing assets held by non-resident investors and ordering Russian companies to convert 80% of their foreign currency holdings into rubles. This has led some observers to question the significance of the ruble’s recovery to pre-invasion levels – something that also happens amid the lowest trading volume in a decade. “It is not a currency with free movement of data of all the measures imposed by the authorities,” Tresca said. US Treasury Secretary Janet Yellen said the same thing Wednesday when she testified in Congress, warning that no deeper messages of sanctions would be received from the ruble’s recovery. However, it is difficult to ignore the lifeline that other nations throw at Putin by buying his country’s oil and gas. This gives Russia a current account surplus – economic terminology for exporting more than you import, something that tends to raise the country’s currency – and undermines the effort to impose sanctions on Russia. “A current account surplus should actually be another source of stability for the ruble,” said Brendan McKenna, strategist at Wells Fargo Securities LLC. “If energy prices remain high and large importers of Russian energy and commodities continue to buy, the current account balance will remain in surplus.” Russia has managed to stabilize local markets and even prevent a messy foreign bankruptcy – at least for now. This means that if the coalition of governments opposed to Putin wants to hurt the ruble again, it will probably have to change its attitude. Just this week, the US Treasury Department banned debt payments in dollars from Russian accounts in US banks in a bid to force Russia to deplete its domestic dollar reserves or go bankrupt. “As Russia’s economy and financial sector adjust to a new equilibrium of capital controls, price management and economic authoritarianism, it is not surprising that some of the domestic markets are stabilizing,” said Elina Ribakova and Benjamin Hilgenstock, economists at the Institute. International Finance. . “Sanctions have become a moving target and will require adjustments over time to remain effective.” They stressed the possibility of tougher financial sanctions, possibly even the disconnection of additional Russian institutions from SWIFT, the communications system used by banks to transfer money around the world. Putin was forced to change his military strategy in Ukraine, withdrawing his troops from Kyiv after failing to capture the capital. The research company Tellimer Ltd. warns not to trust market rallies amid negotiations over a possible end to the war in Ukraine. “Do not buy peace rallies,” said Paul Domjan, a senior analyst at Tellimer. “Investors should be very careful about market rallies following news of peace talks. “There will be a lot of fake dawns as people bravely seek to end this war.” (Updates the price in the fourth paragraph) Most read by Bloomberg Businessweek © 2022 Bloomberg LP
