Biden mocked the ruble, calling it “rubble”. But the Russian currency rebounded.
The value of the Russian ruble fell by 30% after the United States, the European Union and the United Kingdom first issued sanctions in response to the national war against. This dip – which, in early March, caused the value of the ruble to fall against the US dollar to — prompted President Biden last month to mock the currency by calling it “rubbish.”
But the ruble rebounded, nearly doubling its value from its March 7 low. The recent gains mean the currency is now back to where it was before the sanctions imposed by the US and other countries.
Reasons for the rebound include support from the Russian government, as well as continued purchases of Russian energy from the European Union and other countries, Jane Foley, head of FX strategy for Rabobank London, told CBS News. . Even with the large-scale sanctions, Russia continues to export oil, gas and coal, with Bloomberg Economics estimating that the country’s energy exports increase by a third this year to $321 billion.
President Vladimir Putin also implemented “massive capital controls” to stabilize the ruble, strengthening the currency, Foley noted.
“This stability of the Russian ruble is proving beneficial for the economy,” she said. “Russians are putting money back into their own banks. This helps support the Russian ruble.”
Despite the ruble’s recent rally, the international effort to isolate Russia is taking a. The country’s gross domestic product will shrink by 15% this year, the Institute of International Finance recently predicted. To put that into perspective, US GDP fell 3.5% in 2020, when the pandemic shut down much of the national economy.
“Russia has not experienced a recession of this magnitude since the 1990s,” said Elina Ribakova, IIF’s deputy chief economist in a report. “This is an unprecedented shock to the Russian economy.”
Russia has banned foreigners from selling assets they own in the country. This has prevented some Western companies that have ceased doing business in Russia from selling their properties, factories or other assets in Russia.
“There are 400 companies that have said they’re pulling out of Russia and would like to sell assets but can’t,” Foley said.
Russia has also said ‘unfriendly’ nations must pay for energy exports in roubles, a measure created to prop up the currency, but the edict may not have much effect, according to a new analysis of the Federal Reserve Bank of St. Louis.
The biggest problem is Europe’s dependence on Russian energy, Foley said. While the EU has agreed to ban Russian coal, he has yet to agree a sweeping embargo on oil and natural gas that would deal a bigger blow to the Russian economy. This is largely because a ban on Russian energy imports could trigger a recession in Europe.
In the meantime, ongoing European imports of Russian energy are “bringing Russia quite a few rubles … and that means they are capable of mitigating the blow to the economy,” she said. .