After Russia’s invasion of Ukraine on February 24, the sanctions, which depreciated the ruble, recovered most of its losses and returned to its pre-invasion level.
At the beginning of March, the ruble had lost 40 percent of its value against the dollar, but at the end of the month it was only 4 percent below its pre-invasion level against the dollar.
There are factors that played a role in the resistance of the ruble despite the war.
One of the first measures taken by Russia to prevent the depreciation of the ruble was the Central Bank of Russia’s policy rate increase from 9.5 percent to 20 percent on February 28.
Secondly, a 30 percent fee was imposed on foreign exchange purchases. This rate has now dropped to 12%.
Other barriers to the sale of rubles and the purchase of foreign currency by Russian residents and companies were also introduced.
The other measure was that exporting companies such as oil and gas were required to convert 80 percent of their foreign currency income into rubles.
According to the Financial Times, the Russian Central Bank injected $1.2 billion into the market in the first two days of the war to protect the ruble.
The last measure announced by Russia was that oil and gas purchasing countries make their payments in rubles.
Strict capital controls and preventing foreigners from investing in the ruble prevented the country’s financial system from collapsing, according to the Financial Times.
One disadvantage of this is Russia’s isolation from the global financial system.
Will the ruble remain strong?
However, according to some experts, this situation is not permanent.
Speaking to the Reuters news agency, Alfa Bank Chief Economist Natalia Orlova states that the strengthening of the ruble is due to the fact that exporting companies sell their foreign currency on a monthly and quarterly basis.
Orlova emphasizes that this situation creates an imbalance in the foreign exchange market, emphasizing that the ruble is getting stronger, and thinks that this situation is temporary.
Speaking to the Financial Times, Oleg Vyugin, the former Deputy Chairman of the Central Bank of Russia, says that when the war started, the currency depreciated when Russian citizens sold the ruble, but the decline in the ruble stopped when this situation was prevented.
On the other hand, the cessation of imports but the continuation of gas and oil exports enabled the Russian economy to have a foreign trade surplus.
According to Elina Ribakova and Robin Brooks, economists at the Institute of International Finance (IIF), although Russia sells less oil due to the sanctions imposed by the West, it still makes a significant profit with the increase in oil prices.
Despite the strengthening of the ruble, the sanctions are expected to hurt the Russian economy.
According to Ribakova from the Institute of International Finance, the Russian economy will shrink by 15 percent this year.
It is estimated that 400 foreign companies have left the country so far.
https://www.youtube.com/watch?v=xMSpY7ZB0e0
Ruble lower on black market
According to the Economist magazine, the strength of the ruble in this process does not prevent it from losing value in the long run.
The market expects a one-quarter depreciation of the currency within a year.
Since it is difficult for foreigners to buy and sell in rubles, the volume is low, and the price of the ruble against the dollar in the black market is much lower.
The ruble had lost 70 percent in the debt crisis in 1998, and another 70 percent when Putin took office in 1999.
The imposition of greater barriers to gas and oil exports could put the ruble in bigger problems in the long run.