Russian Ruble's Drop Against U.S. Dollar May Put Power Upgrades At Risk

Russian authorities are concerned about projects and investments to modernize Russia’s thermal power plants as the Russian ruble dropped against the U.S. dollar as a result of sanctions.

“I do not exclude that if the financial conditions that we offer appeal to foreign investors, they will come in,” Deputy Minister of Energy Vyacheslav Kravchenko said during a show on Russian media channel, NTV.

“It mainly depends on, let’s say, the stability of the Russian currency. If we fall in relation to the leading currencies of the world, then I do not I think that investors may be interested in investments. Although the [interest] yield that we offer is quite high – this is at the level of 10-12 percent,” said Kravchenko, according to TASS.

In July, the ruble fell to 64 against dollar and 80 against the Euro amidst a tightening of Western economic sanctions imposed on Russia as a result of what the Western powers claim to be its actions in Ukraine in 2016 and the alleged poisoning of a former Russian spy and his daughter in Salisbury, England earlier this year. If the Trump administration issues a new wave of sanctions, some analysts expect the ruble to fall further.

“Putin is our enemy, there’s no question about that, and his country is imploding,” U.S. national security expert Anthony Tata told CNN earlier this year.

“The sanctions that we put on them for the Crimea annexation and meddling in Ukraine, so they could get more natural resources down there have absolutely crushed the ruble by 50 percent. And GDP from 2014 to 2016 is 50 percent down in Russia, as well.”

The Russian Ministry of Energy is trying hard to attract foreign investment that will be used to modernize Russia’s power facilities. Initially, 1.5 trillion rubles ($22.4 billion) were budgeted for the efforts, but a revision of the calculations highlighted the need for more than double that amount – to the tune of 3.5 trillion rubles ($52.2 billion) to upgrade existing facilities and ‘go green’ by 2035.

The role of foreign investors in Russia’s energy sector is among the highest interests of the world’s fourth largest producer of energy, according to IndexMundi estimates. The energy sector accelerates the growth of all other sectors of the country’s economy and serves as the major source of foreign exchange for Russia.