![]() There are a lot of Russian companies doing a lot of business with foreign companies, making a lot of euros and dollars and yen. ![]() This means that a Russian steelmaker that makes a hundred million euros selling steel to a company in France has to turn around and change 80 million of those euros into rubles, regardless of the exchange rate. Next comes a government requirement on Russian businesses that 80 percent of any money that those businesses make overseas has to be swapped into rubles. The fewer rubles that go up for sale, the less downward pressure there is on the currency. ![]() Any Russian who might have been tempted to sell their rubles and buy dollars or euros now has a big incentive to save that money instead. On February 28, the Central Bank of Russia increased interest rates to 20 percent. The internal factors are somewhat less corporeal. Those are the tangible, external factors driving the ruble’s recovery. And were it not able to raise those dollars, it would have defaulted. Without it, Russia might have needed to raise dollars by selling rubles, which would have put downward pressure on the currency. That window is scheduled to close this month, but it has been a big help to Russia. The US Treasury left a window open to allow financial intermediaries to process payments for Russia. The sanctions blocked Russia’s access to that money … except when it comes to making the interest payments on its sovereign debt. About half that amount is located in the US and Europe. Russia holds about $640 billion worth of euros, dollars, yen and other foreign currencies in banks around the world. One of the biggest and most impactful sanctions on Russia was the freezing of its foreign accounts. ![]() There’s another hole in the sanctions that’s worth mentioning here: the sovereign debt carve out. That has eased concerns that Russia would become insolvent, and it has helped put a floor under the ruble. But several European countries continue to buy Russian gas, because they have become so dependent on it, and there are not enough alternative suppliers to meet demand.Īdd to that the increase in oil and natural gas prices and the resilience of Russia’s trading relations with other big economies like China and India, and the net result is that there is still a steady flow of foreign currency into Russia. The sanctions are designed to restrict Russia’s ability to acquire foreign currency, and dollars and euros in particular. The first is thanks to the enormous hole in the sanctions imposed by the coalition of countries allied with the United States: natural gas. There are several components to this recovery. So how have the Russians managed to revive their currency? It’s a sharp and sustained recovery that made the ruble the top performing currency in the world in the month of March.Īnd yet, all of the sanctions imposed when the war began are still in place, and in some cases they’re even more robust. At the time of writing, it was trading at 84 to the dollar, which is right back where it was at the time of the invasion. Since that low point on March 7, however, the Russian ruble has staged a dramatic recovery. A month ago that might have seemed like a pretty good deal: the ruble was down 40 percent, at 139 rubles to the dollar, in the wake of Russia’s invasion of Ukraine. Russia said last week that it wants the European countries that buy its natural gas to make their payments in rubles, rather than dollars or euros.
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