"China uses Russia as a new raw material colony upon which it can force discount prices onto a captive supplier, which wastes dwindling assets unproductively on an unwinnable war of attrition," Rothacher told DW. That includes its growing dependency on China Rather, they say, its a sign of the longer-term damage the costly war is doing to the Russian economy. "The sanctions are having a stronger effect, particularly the EU embargo on purchases of Russian oil and oil products," Ribakova said.īut others say the ruble weakness is not the immediate effect of Western sanctions. Daily trade in rubles is only about $1 billion per day, down from more than $3 billion a day before the war Image: Sylvio Dittrich/IMAGO Are sanctions having a stronger effect? Then there is the growing import costs of Western high tech via third countries like Turkey, Kazakhstan, China and Serbia, Rothacher believes. "Judging by the low liquidity of the currency market, but also the lack of transparency in approving these kinds of deals, all of this will lead to increased volatility against the dollar and euro," economist Gregory Bazhenov wrote on Telegram. The daily trade between the currencies is only about $1 billion per day, down from more than $3 billion a day before the war.
"The reasons behind the currency fall are the shrinking oil and gas exports and likely further withdrawal of capital by Russian resident companies, as well as foreign investors," Elina Ribakova, from the PIIE thinktank, told DW.Īnother factor is liquidity in dollar-ruble trades, says Eric Hontz of CIPE - a think tank affiliated with the US Chamber of Commerce. Bloomberg Economics estimates that foreign companies leaving Russia last year sold assets worth between $15 billion and $20 billion. Several foreign companies have pulled out of Russia since Moscow invaded Ukraine last year. Novatek, Russia's second-largest natural gas producer, is set to acquire the stake. The arrangement allows Shell to transfer 94 billion rubles ($1.2 billion, €1.1 billion) in proceeds from its pipeline project sale abroad. This week, brent crude oil was trading around $85.Īnother factor is President Vladimir Putin's approval of a deal that allows British energy giant Shell to sell its stake in the Sakhalin-2 oil pipeline project in Russia's Far East. The EU's $60-per-barrel price cap is costing the Kremlin over $170 million a day, said the Center for Research on Energy and Clean Air, a Finnish think tank. Russia's budget for 2023 is based on an average annual oil price of $70 per barrel.
The ruble should return to the 75-80 range against the dollar once exporters begin to prepare tax payments, chief analyst Bogdan Zvarich said.īut Albrecht Rothacher, an author who worked for 30 years in the European Commission, says the crucial factor is that Urals crude only fetched $49 (€46) per barrel in January. That's when big exporters trade foreign currency for rubles to meet payment obligations to the state budget. The end of the Russian tax year will reverse this, those observers say. Some observers agree that this is indeed part of the reason, as Russian tax revenues in January fell by 35% alone. The ruble's downturn in recent weeks has been due by higher imports and heightened foreign capital outflows, Russian officials say. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Why did this happen? Russia halts gas deliveries to Poland and Bulgaria
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