Why Has The Russian Ruble Not Collapsed Yet?
BlackBull Markets | May 02, 2022 08:54PM ET
Russia’s efforts to prop up the ruble appear to be working despite sanctions imposed by Western countries aimed at cutting the Kremlin’s access to external resources and crippling the nation’s ability to fund its war against Ukraine.
Last week, the ruble surged to a more than two-year high against the euro and the US dollar, recouping its losses during the war. The rally was triggered by Russia’s last-ditch attempt to avoid defaulting on a Eurobond on Friday.
Russia’s finance ministry paid $564.8 million in interest on a 2022 Eurobond and $84.4 million on another 2042 bond, they said Friday. Both payments were made in US dollars, marking a reversal from its previous threat to pay its debts in rubles.
This week, the ruble has continued its strong performance, with the USD/RUB down almost 3%. As it stands, rubles are exchanging hands at less than 69 per USD.
Before the payment of these bonds, Russia had earlier paid its dollar-denominated bonds in rubles, triggering a rating downgrade by S&P GlobaI ratings to “selective default.”
The rating agency said investors wouldn’t likely be able to convert those payments into dollars equivalent to the amount due as sanctions on Russia are predicted to worsen in the coming weeks.
h2 Gas for Ruble/h2In a bid to bolster the ruble and retaliate against Western sanctions, Russia, one of the top oil-producing countries worldwide, required “unfriendly” buyers of the country’s natural gas to pay in rubles. While many European Union leaders were quick to reject the Kremlin’s demands, one of Germany’s biggest energy companies, Uniper, said it was ready to buy Russian gas by converting its euro payments into roubles.
"We consider a payment conversion compliant with sanctions law and the Russian decree to be possible," a spokesman was quoted by BBC as saying recently, adding that the absence of Russian gas “would have dramatic consequences for our economy.”
Russian national energy giant Gazprom (OTC:OGZRY) recently cut off its gas supplies to Poland and Bulgaria due to their refusal to pay in rubles.
h2 Commodity Powerhouse/h2Many countries’ reliance on Russian oil and other commodities like wheat has helped the ruble avoid collapse and may play a role in supporting the currency moving forward.
Get The News You Want
Vyacheslav Volodin, a top Russian lawmaker, said Russia should demand ruble payments for other commodities like wheat, fertilizer, and lumber over a month ago, adding that Western governments have to pay for their decisions to sanction Russia.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.