The Rumble and the Ruble—How the West’s Sanctions on Russia Strengthen the Ruble and Threaten Globalization


So what was the world’s best performing currency of the past month?

You guessed it: the Russian ruble. After plunging to 139 rubles to the dollar on March 7, the ruble staged a dramatic comeback to around 80 rubles to the dollar. That’s only slightly weaker than where it was for almost all of last year. The recovery is equally impressive when compared with the euro. At the end of February, it took 89 rubles to buy a euro. In early March, that climbed to around 145 rubles. Now it is down to 87.32.

On Friday, the joke among foreign exchange traders was that the Russian central bank was going to have to cut interest rates to keep the ruble from getting too strong and making its exports too expensive. That’s unlikely, but the point is important: the sanctions on Russia were intended to cripple its currency on the global market in order to weaken Vladimir Putin’s economy. The recovery indicates that the sanctions, even as they have been strengthened both by official measures and private companies renouncing business ties with Russia, are not working as advertised.

The biggest reason for this, of course, is natural gas. Russia began to demand recently that Europe pay for natural gas in rubles instead of euros. So far, only Hungary has announced its intent to comply with this, but it’s far from clear that the rest of Europe will be able to hold out. That would create a demand for rubles, especially from places where most of the saving is in euros. So the euro will fall against the ruble. Since markets are anticipation engines, that has already begun in advance of European capitulation on the currency issue.


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