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The Russian ruble: a currency teetering between geopolitics and economic challenges

The world of finance is a theater of continuous evolutions, and recently, the protagonist of this stage has been the Russian ruble. Its drastic weakness, which saw the surpassing of the threshold of 100 rubles per dollar, has raised questions about Russia’s ability to maintain monetary stability in a period of growing geopolitical tensions and Western sanctions.

The offensive launched by Moscow against Ukraine at the beginning of 2022 has triggered a series of chain reactions. Beyond the evident political and military tensions, the economic sanctions imposed by the West have eroded Russia’s financial foundations, reducing revenues from exports and widening the country’s budget deficit.

The Russian Central Bank, in an attempt to stem the fall, has adopted emergency measures, increasing interest rates. However, despite these efforts, the ruble seems unstoppable in its descent. There is also talk of possible restrictions on capital movements, but so far without tangible results.

Dmitry Peskov, Kremlin spokesperson, has tried to downplay the importance of this monetary crisis, emphasizing the importance for Russia to consolidate its own “ruble zone”. However, the economic reality and daily repercussions for Russian citizens are undeniable.

The Kremlin has tried to downplay the ruble’s collapse

Financial sector experts are trying to decipher the causes behind this instability. Some suggest that the recent ruble weakness is linked to end-of-month fiscal dynamics, while others highlight the embargo imposed by Moscow on diesel and gasoline exports as an aggravating factor.

The growing demand for foreign currency in Russia, combined with limited supply, has created an imbalance in the market. This has led to a rush to purchase strong currencies, both by companies and individual citizens.

The current weakness of the ruble also has a direct impact on inflation. With a weak currency, imports become more expensive, further fueling inflation. This phenomenon has alarmed the higher government spheres, with President Putin expressing concern about the growing inflationary pressures.

Faced with these challenges, the Russian government is considering new measures to stabilize the ruble. Among the proposed solutions are restrictions on bank transfers abroad and the introduction of a currency control system similar to the Chinese one.

If these measures were adopted, they would represent a significant change of direction for Russian economic policy, highlighting growing concerns about the country’s future.

In summary, the Russian ruble finds itself in the eye of a perfect storm, between geopolitical challenges and economic difficulties. The road to stabilization will be long and winding, but it represents a crucial test for Russia’s economic resilience.

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