The West has been piling sanctions on Russia. Yet, the ruble seems to be bouncing back to pre-war levels. Currently, the ruble is at 80 rubles to a dollar.
At least 4000 sanctions have been slapped on Russia by NATO (North Atlantic Treaty Organization) since the invasion began. International transactions of major banks have been blocked; 300 Russian companies along with 500 institutions, and more than 3000 individuals have been blacklisted. Russia's invasion of Ukraine triggered an economic war as well. As a result of the west and EU nations refusing to buy fuel or gas from Russia (the EU imports 40 per cent of its fuel from Russia), fuel prices all around the world have been increasing.
Russia has staved off a default on its debt by making a last-minute payment using its precious dollar reserves sitting outside the country, US Treasury officials said.
The amount of the payment was not disclosed, but earlier this month Russia's finance ministry said it tried to make a $ 649 million payment due April 6 toward two bonds to an unnamed US bank previously reported as JPMorgan Chase.
Investors and rating agencies, however, disagreed and did not expect Russia to be able to convert the rubles into dollars before a 30-day grace period expired next week, leading to speculation that Moscow was heading toward a historic default on its debt.
Russia has not defaulted on its foreign debts since the Bolshevik Revolution in 1917 when the collapse of the Russian Empire led to the creation of the Soviet Union.
Since the US sanctioned Russia's Central Bank early in the conflict, Russia had only the ability to either use fresh revenues coming from activities like oil and gas sales or existing foreign currency reserves sitting outside the country.
“We are going to wage a total economic and financial war on Russia,” French Finance Minister Bruno Le Maire said on March 2. “We are going to cause the collapse of the Russian economy.” Finance Minister Anton Siluanov said the country made a $565 million Eurobond that was due this year, as well as an $84 million Eurobond that was set to mature in 2024. Both payments were made in US dollars. The obligations of servicing sovereign Eurobonds are being carried out in accordance with the conditions laid out during the issue of the bonds. Russia's payments towards the bonds in dollars serve as a last-ditch effort to avoid a default.
The ruble fell when the war began on February 24. As of March 7, it was at 139 rubles to a dollar. In recent days, however, the ruble has been one of the world's top-performing currencies.
Putin took measured steps to help the ruble to bounce back. Russia has made restoring the value of its currency a major objective. “Unfriendly countries” that imposed sanctions on Russia were asked to pay for fuel in rubles. While most EU nations and the US refused to comply with the demand, four European nations paid for the supplies in rubles, which contributed to the revival of the ruble. Russia supplies gas via pipelines to 23 European countries.
The Russians have been manipulating the market to benefit the Russian currency. They restrict how foreigners or anyone who has invested in the country can sell rubles. The country's central bank—The Bank of Russia pumped USD 1 billion on the day of invasion to support the ruble. The country also prohibited all Russian residents from transferring foreign currency abroad.
The Bank of Russia, on March 25, announced that it is resuming gold purchases at a fixed price of 5000 rubles per gram. It imposed a ban on foreigners securities selling and necessitating exporters who earn foreign currency to convert it into rubles. On February 28, the Bank of Russia doubled the benchmark interest to 20 per cent and on April 8, lowered its benchmark from 20 to 17 per cent.
Russia currently is running on a giant trade surplus. It is manipulating all probabilities to prevent the ruble from tumbling.
-- With PTI inputs
