In The Wake Of Sanctions, Russian Ruble Plummets

The ruble, Russia’s national currency, is tumbling, to lows that may impact Russia hard for the foreseeable future.

On Sunday the ruble stood at $ 0.01610 and € 0.01305, some of the lowest rates not seen since last December. The U.S. dollar stood at slightly below ₽ 62.11, while the Euro was just below ₽ 76.62.

The rapid decline in the ruble’s value is widely being attributed to American sanctions slapped on Russian businesses earlier this month.

On April 6, the U.S. Department of Treasury announced sanctions against 17 senior Russian government officials, 12 companies, as well as seven Russian businessmen. Among the sanctioned billionaires is aluminum tycoon Oleg Deripaska, oil tycoon Vladimir Bogdanov, and aluminum baron Viktor Vekselberg. A press statement issued on the same day read that these sanctions are imposed following the results of the so-called Kremlin report, which was promulgated in January 2018.

Heinz Rüttimann, a Switzerland-based analyst for strategic research of emerging markets says Russia’s market was not yet fully aware of the scale of sanctions, but now they are facing the reality.

“As the new sanctions are applied to both bonds and shares, while very strict deadlines are set for their compliance, the currency market inevitably turns out to be under their influence,” he told Russia’s Kommersant last week.

As a result, the main benchmark of the Russian stock market fell by 8.3 percent last Monday, while the net worth of five of the seven sanctioned Russian billionaires fell by a combined amount of $4.2 billion.

In addition, the U.S. announced its intent to impose additional sanctions against Russia due to the recent chemical attack, which took place in Dumah, the Syrian city controlled by the Jays al-Islam group. In response to the incident, U.S. President Donald Trump warned that those supporting President Bashar Assad “will have to pay a big price.”

Meanwhile, the head of the Russian Central Bank, Elvira Nabiullina believes the Russian economy and the financial sector will be able to adapt to the new conditions.

“We think that some amount of time is needed for both the financial sector and the economy to adapt to these external conditions that have changed,” she said while addressing the forum of the Moscow Stock Exchange held last Tuesday.

Some experts say the ruble may revive during the upcoming 2018 FIFA World Cup, scheduled for this summer at venues throughout Russia. According to Maksim Kharitonov, CEO at the Kharitonov Kapital investment company, football (soccer) fans will bring and spend at least $0.5 billion in Russia.

“But . . . after this, the prospects for the Russian economy will remain the same – the fight against sanctions, the risk of the drop in oil prices, the budget deficit, and GDP growth at a near zero level,” he said.