The Russian ruble has returned from crippling economic sanctions imposed on Moscow following the invasion of Ukraine and is now at its strongest in more than seven years – giving it the award for the best-performing currency in the world so far this year.
The ruble traded at 54.47 to the US dollar on Thursday – far from the 139 to the dollar to which the currency fell in March when the US and the EU sanctioned the Kremlin for its invasion of Ukraine.
Since the beginning of the year, the ruble has risen 40% against the dollar – better than any other currency in the world.
Russian President Vladimir Putin has proclaimed the robust recovery of the ruble as proof that his economy has successfully withstood the onslaught of Western sanctions.
“The idea was clear: crush the Russian economy violently,” Putin told an economic forum in St. Petersburg. Petersburg last week. “They did not succeed. It obviously did not happen.”
Under normal circumstances, a country affected by economic sanctions will experience a capital flight, causing its currency to plunge in value.
Analysts attribute the ruble’s strong performance to the Kremlin’s aggressive measures to prevent cash from leaving the country, as well as to rising oil and natural gas prices.
Russia is the second largest exporter of oil in the world. It is also the world’s largest exporter of natural gas.
Oil prices began to rise steadily in late 2021 when it became clear that Putin was massaging his soldiers near the border with Ukraine.
On Nov. 30, U.S. crude traded at about $ 66 a barrel. barrel. In late February, when the attack began, U.S. crude oil cost more than $ 92 per barrel. barrel.
Last week, U.S. crude oil rose to more than $ 120 per barrel. barrel before retiring in recent days due to fears of a recession.
The price of natural gas has taken a similar path.
Exports of fossil fuels have allowed the Russian government to harvest $ 20 billion a month since the start of the war in Ukraine.
An analysis of Bloomberg Economics earlier this year found that the Kremlin could amass a profit of $ 321 billion this year from energy exports alone.
While the United States and Britain have banned Russian energy imports, other nations continue to buy from Moscow, including China, India and South Korea.
The EU, which is heavily dependent on Russian energy imports, has promised to get rid of oil and natural gas in favor of renewable energy.
“Commodity prices are currently sky-high, and although there is a decline in the volume of Russian exports due to embargoes and sanctions, the rise in commodity prices more than compensates for these declines,” said Tatiana Orlova, an emerging markets economist at Oxford Economics. told CBS MoneyWatch.
The Russian central bank has also strengthened the ruble by banning foreign holders of Russian shares and bonds from taking dividend payments out of the country.
Russian exporters are also required to convert half of their surplus income into rubles.
Despite the mass exodus of Western companies from Russia, the Kremlin has made it difficult for them to sell their local investments at reasonable market prices.
“Although we see these announcements that Western companies are leaving Russia, quite often they have to hand over their share to their local partners,” Orlova said.
“It actually does not mean that they are paid a reasonable price for their efforts, so they do not move large amounts of cash from the country.”