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Why is the Russian currency more valued than before the war?

O presidente russo, Vladimir Putin, admitiu repetidamente que as sanções impostas pelo Ocidente estavam criando dificuldades significativas

Russian President Vladimir Putin has repeatedly admitted that Western-imposed sanctions were creating significant difficulties
| Photo: EFE/EPA/SERGEI GUNEYEV/SPUTNIK/KREMLIN POOL / POOL

Despite the sanctions imposed by the West on Russia, the ruble this week recorded its biggest appreciation against the dollar since 2020. The Russian currency still hit a high of 20 % against the US currency from January to April. But it is possible that the balance is favorable for the Russians for a short time.

The subject has generated controversy in European politics. Jordan Bardella,

interim president of the French Conservative Party National Rassemblement, stated that economic sanctions are “a big mistake”.

“They are massively enriching Russia, which is profiting from this war, is making hyperprofits. The embargoes caused an explosion in fuel prices”, pointed out Bardella.

Russian government has taken steps to defend the ruble

Ironically, the sanctions may have temporarily contributed to the appreciation of the Russian currency. This is because, to protect the ruble, the Kremlin imposed high interest rates on the Central Bank, forced exporters to sell foreign exchange and demanded that natural gas be sold in rubles. As proof that the Russian economy is doing well, after the interest rate hike, the Russian Central Bank announced the second drop in less of a month. In the statement, the bank said that “the risks to prices and financial stability have ceased to increase, creating the conditions for a reduction in the key rate”. The note sent to the press further describes that “the slowdown in inflation is largely attributable to the strengthening of the ruble and the decline in consumption.”

In official announcements, Russian President Vladimir Putin repeatedly admitted that Western-imposed sanctions were creating significant difficulties, but he also dared to say that he seized the opportunity to rebuild. and diversify the economy. Russia would be increasing exports to Egypt and India.

With the rise in oil, natural gas and coal prices, the Kremlin still made billions of dollars even with what it exported in recent months to the European Union.According to the Center for Research on Energy and Clean Air, a study center in Finland, the total Russian gain from exports was 20 billions of euros during the first two months of the conflict in Ukraine. % of this amount came from the European Union: European countries spent in 2022 almost twice as much as in the same period last year.

Russian good time should not last

The ruble’s appreciation wave, however, may be out of date. According to International Monetary Fund (IMF)

), “unprecedented sanctions and uncertainties are expected to strongly affect investment and exports, as well as depress imports and private consumption in Russia.”

Furthermore, the IMF report highlights that the European desire to get rid of Russian hydrocarbons until 2027 can delete from 60 to 70% of current demand by Russian oil and natural gas in the coming years.

Economic indicators also against the thesis that Russia can, in the long run, get richer with the war. The Gross Domestic Product (GDP) is expected to collapse this year, with projections oscillating between -8%, according to the Central Bank of Russia, and -%, according to the European Bank for Reconstruction and Development (EBRD). At the same time, inflation is expected to jump more than 20%.

High interest rates in Russian banks also tend to limit investments by Russian companies. Therefore, Putin’s strategies may start to fail and the ruble’s good moment should not last long.

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