The ruble reaffirmed its unusual standing as the world’s best-performing currency this week, surging to multi-year highs. The ruble has roared back after plummeting in the weeks following Russia’s invasion of Ukraine, which provoked broad international sanctions aimed at damaging the Russian economy.
On Wednesday, the Russian ruble reached 52.3 per dollar, a 1.3% rise over the previous day and its highest level since May 2015. It has risen over 35% this year, outperforming every major currency, and has more than quadrupled from its post-invasion low. The currency has become so strong that Russia’s central bank is actively attempting to weaken it, worrying that it may make Russian exports less competitive.
Although Russia’s economy has outperformed expectations, the prognosis is bleak, with double-digit inflation and most experts forecasting a devastating recession. However, capital limitations implemented by its central bank, such as forcing exporters to convert a portion of their revenues into rubles, have fueled demand for the Russian currency.
Russia is raking in historic profits from oil and gas. Simply said, the causes include shockingly high energy prices, capital constraints, and sanctions themselves. Russia is the world’s largest gas exporter and the world’s second-largest oil exporter. Its major consumer is the European Union, which buys billions of euros in Russian energy every week while attempting to penalize it with sanctions.
While many EU nations want to reduce their dependency on Russian energy imports, the process might take years — according to Eurostat, the union relied on Russia for 41% of its gas imports and 36% of its oil imports in 2020.
This has left the EU in a delicate position since it has now handed Russia exponentially more money in oil, gas, and coal purchases than it has sent Ukraine in aid, which has contributed to the Kremlin’s war fund. Even while several Western countries have reduced their purchases of Russian oil, Moscow is still reaping a record profit with Brent crude prices 60% higher than this time last year.
In mid-May, Russia’s Ministry of Economy predicted that unemployment would reach about 7% this year and that a return to 2021 levels would be improbable until at least 2025.
Thousands of multinational enterprises have left Russia since Russia’s conflict in Ukraine began, leaving a large number of jobless Russians in their wake. According to Russia’s government statistics office Rosstat, foreign investment has plummeted and poverty has virtually quadrupled in the first five weeks of the war.
