Buoyed by positive expectations bolstered by the Istanbul peace talks and by the Russian central bank’s swift and firm measures to support it, the Russian ruble made a dizzying rebound on Wednesday approaching its pre-war value.
The Russian currency traded at 83 per dollar, just two rubles from the level it reached on February 23, a day before President Vladimir V. Putin ordered Russian troops to invade Ukraine.
The rebound went against expectations. On Sunday, President Biden said on Twitter: that as a result of sanctions “the ruble was reduced to rubble almost immediately”.
The ruble’s strength is most likely caused by artificial factors and may not be a good indication that the Russian economy is improving, said Yevgeny Nadorshin, the chief economist at the Moscow consulting firm PF Capital.
“In view of sanctions and counter-sanctions, which restrict Russia’s cross-border trade and thus reduce the demand for foreign exchange, we cannot say that exchange rates reflect the economic reality in the country,” said Mr Nadorshin.
Since Western nations imposed sanctions on Russia for invading Ukraine, the Russian central bank has taken a number of strategic steps that have further curtailed international trade but prevented a catastrophic bank run and capital flight.
For example, it ordered Russian companies to convert 80 percent of the foreign currency earnings they receive under export contracts into rubles. That allowed the central bank to amass some hard currency as the West froze more than $300 billion in Russian reserves, Mr. nadorshin.
The country’s main financial regulator also limited the amount of foreign currency Russians can withdraw from their bank accounts to $10,000 over the next six months; anything above that would be paid in rubles. The key interest rate was raised to 20 percent, making ruble deposits more attractive, but also making loans, including mortgages, unaffordable.
Russia can live under such restrictions for a long time, Mr Nadorshin said, but the price would be further isolation and long-term development.
“The Soviet Union took a long time,” he said, “but we know what it all ended with.”