Russia: Ruble declines most since 1998 financial crisis

The ruble, not faring well for months now, plunged to new depths once again earlier today. This newest nosedive takes it down to levels unseen since the 1998 financial crisis. The currency’s problems are believed to stem mostly from tumbling oil prices (currently flooring at a little less than $80 for the Brent Crude benchmark). This new record is roughly 53.91 rubles per dollar, a move of almost 9% – while the currency is currently rallying to higher levels after hitting that floor, it does raise the value of Russian exports. Unfortunately, as one of their largest trading partners is Europe, sanctions prevent them from taking advantage of these gains to be made on exchange rates.

Pressure on the Central Bank to intervene is rising, as their last action was allowing the ruble to float two weeks ago. Ksenia Yudaeva, the deputy chairwoman of the Russian Central Bank, said that they have put in new estimates for long term growth, working off the assumption that oil will sink to $60 a barrel, yet another unprecedented nosedive. Their decision was no doubt influenced by the meeting of OPEC last week, where Saudi Arabia staunchly refused to limit their own exports in a bid to drive up prices by creating temporary artificial demand. She also announced that interest rates would be raised to 9.5%, in an effort to stem the flow of Russian households (i.e. savers) from changing their money for dollar and euros and to encourage domestic savings in Russian banks in rubles.

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News Briefs:

  • A UN tribunal acting as the arbiter on a dispute between Latvian businessman Valeri Belokon and the Kyrgyz Republic has ruled that $16.5 million in compensation is required for a bank seized by Kyrgyzstan in 2010. Belokon acquired the bank Insan in 2007, which was renamed Manas Bank, but it was closed during the Jade Revolution of 2010 when widespread protests resulted in turmoil and the resignation of President Kurmanbek Bakiyev. The main offense against the bank was Belokon’s friendship with son of Kurmanbek, Maxim Bakiyev who was the centerpiece of the charges of corruption against the former ruling party of Kyrgyzstan.
  • Russia announced it is hoping a deal to supply grain and equipment to Iran in return for oil can be reached soon, according to Economy Minister Alexei Ulyukayev during a meeting in Tehran. In January, a report was made that the barter deal could reach upwards of $20 billion that would see Moscow buy 500,000 barrels a day in exchange for Russian goods. The agreement would enable Iran to significantly boost oil exports despite an embargo, but it is unclear why Russia would agree to this deal in light of its current economic struggles and glut of oil supply within its own economy.

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