With extremely tough punitive economic measures being placed on Russia following the invasion of Ukraine, the value of the currency has plummeted over the last 5 weeks. In an attempt to resolve the crisis, and prevent the free-fall of the ruble, Russia has attempted to seek gas and oil payments made in the currency rebuked by western buyers.
With official figures placing the value of the ruble to 77.5o to one US dollar, a leading economist suggests the value of the currency is far lower.
Taking to Twitter, Michael McFaul, a Professor of Political Science at Stanford University, and former US Ambassador to Russia delivered his verdict.
He said: The ruble has not “recovered”!
“It is being artificially supported by government interventions, especially currency controls.
“Economists I trust estimate that the real exchange rate is 200 rubles to the dollar.”
Following the invasion of Ukraine, the ruble slipped to over 100 per dollar but has since recovered from the impact of sanctions placed on Russia.
Anton Siluanov, Finance Minister, said Wednesday his ministry and the central bank are working together to improve the predictability of the rouble’s exchange rate.
The notion of manipulating the currency has been backed up by other leading academics and officials.
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The European Commission had already signalled part of the plan is to cut the use of Russian gas by two-thirds by the end of 2022, with a longer-term goal of having ended imports of Russian energy by 2030.
German Chancellor Olaf Scholz justified exempting Russian energy supplies from sanctions, saying in a statement: “At the moment, Europe’s supply of energy…cannot be secured in any other way.”
Foreign Minister Annalena Baerbock even suggested banning Russian energy in Germany could result “in a situation where nurses and teachers are not coming to work, where we have no electricity for several days” and would plunge EU countries into chaos.
Does the falling value of the ruble show sanctions are working? Will higher prices in Russia lead to a populous revolt? Is the world too dependent on Russian gas to effectively sanction the country? Let us know what you think of these points by CLICKING HERE and joining the conversation in our comments section below – Every Voice Matters!
India has also abstained from ceasing its purchase of Russian energy, even signing a rubles for rupees deal with Russia following the invasion of Ukraine.
Responding to Professor McFaul, the aptly named Adam Smith said on Twitter: “It looks like Beijing offered some currency advice to show the Kremlin how to artificially support their currency.
“China has been doing the same thing for decades now under the premise that the longer a lie is maintained the easier it is for people to accept.”
Speaking of the impact of sanctions on the Russian currency, whilst in Poland, US President Joe Biden famously quoted the ruble had completely lost its structure.
He said: “As a result of these unprecedented sanctions, the ruble almost is immediately reduced to rubble.”
With a depreciating value of the currency, the cost of living is expected to rise in Russia as imported goods become less affordable to everyday people.