The ruble hit a 17-month low against the dollar on Monday, underscoring the impact of Western sanctions sparked by Russia’s invasion of Ukraine in February 2022.
The ruble has lost nearly 40% of its value so far this year. It’s presently weaker than 100 rubles to one dollar, one of several negative indicators for the Russian economy even as President Vladimir Putin declares that Western sanctions have had very little effect.
In contrast to Putin’s claims, the European Union has asserted that as of February of this year, or one year after Russia invaded Ukraine, sanctions imposed by the EU and its partners have, in fact, reduced Russia’s ability to finance its war. According to the EU some €300 billion ($327 billion) of Russian Central Bank reserves are blocked by the EU, other G-7 countries and Australia.
The ruble initially collapsed in the shadow of Russia’s invasion, dropping as low as 136 rubles to one dollar in March 2022. The currency briefly bounced back to 50 against the dollar in June of last year as oil and gas prices surged—but since then, European economies have weaned off Russian oil and gas, importing more of the commodities from the U.S., Canada and Norway.
The Kremlin, meanwhile, has reportedly doubled its 2023 defense spending to more than $100 billion, or one-third of all Russia’s public expenditures.
The Bank of Russia has also stated that it “admits the possibility of raising the key interest rate in coming meetings,” to stave off rising inflation that’s further devaluing the ruble.
If that happens it would be an additional hike in the Bank Russia’s key interest rate, which was pumped up a percentage point last month to 8.5%.
