If it does that, it could end up in a difficult situation where investors rush to withdraw gold from the central bank, leading to extreme destabilization in the country’s financial system.

Mihailov noted that the problem for Russia, if it enacts “gold parity,” is that it will also be forced to exchange rubles for gold at the 5,000 rubles per 1 gram price. “People still have this nostalgia to the gold standard…they perceive money as being tied down to gold, so it can’t inflate.” “I think the link between the ruble and gold is intended to transfer strength and credibility from gold, which is a symbol of stability,” Mihailov said. To his knowledge, the move also represented the first time a nation’s currency has been expressed in “gold parity” since Switzerland decided to end a similar policy in 1999. Mihailov said the move effectively created a gold-based exchange rate of 81 rubles to $1 and helped to support the currency for a time. On March 25, Russia also began buying gold from banks at a fixed price of 5,000 rubles (roughly $61) per 1 gram. This year alone, Russia is expected to receive a whopping $321 billion from its energy exports, Bloomberg reported last week. Those flows can’t be stopped overnight, meaning the ruble will continue to be supported by oil and gas sales for the foreseeable future. And the country provides roughly 40% of Europe’s natural gas. Russia was the world’s largest natural gas exporter in 2021, and the second-largest crude oil exporter, according to the U.S.

One of the most potent tactics Russia has used to buoy its currency is demanding payments for oil and gas exports in rubles.īut cutting off energy imports from Russia is easier said than done.

So I think you’re going to see that change,” Blinken said, adding that he is working every day to tighten sanctions and close loopholes that have allowed the ruble to appreciate.įrom raising its benchmark interest rate to forcing exporters to swap 80% of their foreign currency revenues for rubles, Russia’s central bank has done everything it can to prop up the rubles’ value since the Ukraine invasion began, but it’s more than just manipulation that’s supporting the currency’s value. That’s artificially propping up the value.

“People are being prevented from unloading rubles. Secretary of State Antony Blinken told NBC’s “Meet the Press” on Sunday that Russian “manipulation” was the main cause of the ruble’s recent rebound after the Russian government restricted its citizens from transferring money abroad. That kind of pessimism should, in normal circumstances, lead to a depreciating currency-but the ruble has proved to be resilient. Ratings agencies have also downgraded Russian debt to junk status, arguing the country may be headed for “ imminent” default. The appreciation has surprised experts who predicted the ruble would continue to fall, barring a ceasefire in Ukraine.Īfter all, the Russian economy is expected to contract by as much as 15% this year, according to the Institute of International Finance. Since then, the currency has largely recovered, all but undoing the losses it suffered as a result of the war and subsequent sanctions.

Russia currency value