The ruble is sinking. Against the dollar, the Russian currency has lost 40 percent of its value this year alone. The ruble has not been this weak since March 2022, when Russia launched its full-scale assault on Ukraine. Moscow is trying to save the situation, but even the staunchest propagandists loudly say that the situation is dire.
Vladimir Soloviev is a leading Russian propagandist and Putin’s man. He is allowed to say more than the average Russian. If he loses his temper in public, it means that things are bad in Russia. – The whole foreign country is laughing at us now! Because the ruble is now one of the weakest currencies, warns Vladimir Soloviev. Solovyov is furious because the Russian currency has crossed the psychological barrier – 100 rubles to the dollar. It appeals to the imagination of Russians that one ruble can now get no more than one US cent. In the markets, the ruble is only compared to the Turkish lira and the Argentine peso, which means it scrubs the bottom.
For the average Russian, this means that even harder times are ahead. – The exchange rate of the dollar is directly related to food prices. So if we go to any store, we will immediately see that the increase in food prices exceeds any official figures, says Kamil, a resident of Moscow and a financial controller.
The ruble has not been so weak since March 2022, i.e. the first weeks immediately after the Russian invasion of Ukraine. Back then, the Kremlin tried to save its currency by making the world pay for its raw materials in rubles. Then Western sanctions gradually began to take effect – including cutting off Russian financial institutions from the global SWIFT settlement system. – Taking into account the practice to date, the Russians are able to tighten their belts very tightly. This is already evident in the economic indicators. Russians are starting to take out more and more loans, trying to pay off old loans. They also start to save less or stop saving money and real wages start to fall, says Agnieszka Legucka, an analyst for Russia at the Polish Institute of International Affairs.
– I would like the ruble exchange rate to be fixed, as it was in the times of the Soviet Union, but it is not. We’ll survive though. Somehow it will be – says Valentina, a resident of Moscow.
Finding a scapegoat
In an attempt to save the sinking currency, the Central Bank of the Russian Federation drastically raised interest rates from eight and a half to twelve percent, but this did not calm the situation. – We can observe irrational behavior of business entities. Both exporters and importers, households, companies. They can now rush to take, for example, a loan when they think it is still cheap. This may end in a recession already, for example, in October – warns Yevgeny Nadorszyn, chief economist of “PF Capital”.
The Kremlin is starting to look for a scapegoat, because Putin and his war cannot be to blame. The answer is given by Vladimir Soloviev. “It’s because of the brilliant policy of our Central Bank, which despises people asking what’s going on,” says Soloviev.
Russian propaganda conceals the fact that a weak ruble is beneficial for the authorities, because it allows them to reduce the budget deficit, thanks to which they can spend more on the army. The fall in the value of the Russian currency by 1 ruble against the dollar increases the revenues to the state budget by about 1.5 billion dollars, which can be spent on additional armaments.
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Main photo source: Reuters