Russian Ruble Best Gainer In 2022

The Russian currency has reportedly made large gains in spite of the sanctions imposed on Moscow by the United States and Washington’s allies.

The US and EU attempted to cripple the Russian economy, but the value of the ruble is heading up. After two months of imposing state-crushing sanctions, the ruble is now stronger than before the invasion of Ukrainian territories. The West is still considering more sanctions, yet, the ruble is expected to gain more strength against the Euro and the US dollar.

The ruble is 2022 is the best-performing currency round the globe, surging by 11% in its exchange rate with the dollar over the last four months. The surge in real dollars is between .013 to .015, that is to say one ruble is still worth less than a penny, but the ruble is only one of three currencies to gain at all against the dollar this year.

Some commentators do believe that China is helping to prop up the Russian economy, while others see China’s continued trade as enough to offset the damage incurred by EU and US sanctions. In mid-April, US Treasury Secretary Janet Yellen sent a warning to leaders in Beijing.

Yellen said that if China began to backfill Russia’s economy to mitigate the impact of western sanctions, “it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security.”

“China cannot expect the global community to respect its appeals to the principles of sovereignty and territorial integrity in the future if does not respect these principles now when it counts,” said Yellen. Support from China explains part of the ruble’s sudden surge, the efforts taken by Russia’s central bank should not be undervalued. The central bank took dramatic steps to increase demand for the ruble with some risks for the country’s economic future.

While graphs show the ruble is gaining momentum, news from Moscow does tell a different story. Sanctions have led to a dramatic decrease in imports that has outpaced the decline in exports. To explain this; Russian goods leave the country in higher quantities than foreign goods are coming in. Central bank officials reported that while new suppliers and sales markets are emerging, companies and businesses are experiencing considerable difficulties in production and logistics.

After sharp increases in demand as the invasion began, fueled by fears of shortages, the RCP recorded that consumer demand stabilized from levels seen in late February and early March. Shortages are felt everywhere, with the central bank noting that two-thirds of companies in Russia have suffered from import disruptions.

The strength of the Russian economy partially comes from the fact that natural gas has not been seriously affected by sanctions. The EU has proposed a similar ban on Russian energy exports to that of the US but so far has failed to get all members on board.

Russia did weaponize the dependence on its exports to increase demand for its currency. Gazprom, the state-owned company, announced suspension of exports to Poland and Bulgaria because both countries have refused to pay in rubles. Threats against other EU countries highly dependent on Russian energy resources, including Germany, have been made, but no actions have been taken so far. By forcing these countries to make payments in rubles, they have to buy the Russian currency, which means that the demand and value of the currency could continue to surge.

The United States banned imports of Russian oil, which led to a sharp increase in global prices. Russia’s Central Bank has reported that sanctions have led to “a contraction of [oil] exports due.” Citing the Central Dispatching Department of the Fuel and Energy Complex, the bank reported a 10.9 percent drop in oil refining in March.

The EU’s proposal to ban Russian energy resource exports would require the transition away take place in the next six months. The move would be a severe escalation in Europe’s economic attacks on the Russian economy. Countries highly dependent on Russian oil exports like Hungary (75 percent) and Slovakia (100 percent) are voicing their opposition to the proposal.

Hungary’s Orbán, who has been just reelected for the fourth time, said in an interview that a Russian oil embargo could ruin the country’s economy, drawing a red line over their support for such a move.