Why is that?
Shouldn't the value of a currency reflect two things, the strength of a nation's economy and the soundness of the currency?
The strength of the Russian economy surely went down, right?
So it can only be due to the soundness. The market seems to expect Russia will not expand the Ruble supply more than the USA will expand the Dollar supply?
Additional supply -> Lower price.
No, because the people buying the Rubles aren't buying them on the open market. The people buying the Rubles are the people owed USD that are buying them for the rate the Russian Central Bank dictates with no choice in the matter.
Plus, it provides a price floor. If I owe you $1,000,000 USD, but I can pay you 50,000,000 Rubles instead, I'm incentivized to buy Rubles up until it reaches 50 Rubles : 1 USD.
> Additional supply -> Lower price.
The supply isn't changing at all. The demand, whether natural or forced, is what's exploding.
So from a basic perspective there's just more of that going on in one direction, less happening in the other direction, so in the end the value goes up. Though it might be pretty theoretical! If you were given a bunch of rubles today, as a Russian national, how easily would you be able to actually convert those to dollars?
That being said, tight currency controls at borders for a large economy does let you control the value of your currency like this, and the downsides of relatively heavy currency controls feel really theoretical if you are not trying to hide a bunch of money (from an economic perspective at least).
> Russia is the world's largest exporter of gas and the second-largest exporter of oil. Its primary customer? The European Union, which has been buying billions of dollars worth of Russian energy per week while simultaneously trying to punish it with sanctions. That's put the EU in an awkward spot – it has now sent exponentially more money to Russia in oil, gas and coal purchases than it has sent Ukraine in aid, which has helped fill the Kremlin's war chest. And with Brent crude prices 60% higher than they were this time last year, even though many Western countries have curbed their Russian oil buying, Moscow is still making a record profit.
It’s more complicated than those blurbs though. Also while the ruble may be artificially strong it doesn’t mean everything is going great in Russia, far from it.
https://www.cnbc.com/amp/2022/06/23/russias-ruble-is-at-stro...
Again, this comes at a cost, which while prohibitive to some is not an issue for Russia, sitting on a pile of cash as they are.
Not sure about this, it's not about will, it's about not being thrown in a sanction package youself.
They both rely on oil and gas so aren't willing to negotiate on that, but they are dependent on the west for trade so will play ball.
True, but this works in reverse as well. Where does the US/Europe get their stuff from?
Obviously western society won't collapse due to the lack of Chinese merchandise, but it will have a huge effect.
If anything, the sanctions that were imposed on Russia only served to illustrate the above, and may serve as incentive to other dictatorial hopefuls.
- Russia is the world's largest exporter of gas and oil.
- Gas and oil prices go up.
- Russias economy is stronger
The amount of currency depends both on the stuff people buy from you (money flowing down from the mountain) and on the stuff you buy from people (money flowing through the dam).
My comment simplified the situation though.
Her problem now is that it starts to be too strong.
> Critical supply chains in Russia have been shattered. Hundreds of Western companies have pulled out of the country. Export sanctions have strangled Russia's access to essential technology and components necessary for entire industrial sectors. Tank factories have shut down. Missile manufacturers are scrambling for critical components and parts. An economy projected to grow in 2022 is now on a path to contract by as much as 15%.
> In rare moments of candor, some Russian officials have provided glimpses into the economic damage taking hold. ¶ Russian Minister of Transport Vitaly Savelyev said in May that the sanctions "have practically broken all the logistics in our country." ¶ Russia is by no means the first country that's been sanctioned by the US. But compared with North Korea, Venezuela or Iran, it is far more integrated into the global economy, which has made this latest round of sanctions all the more destructive. ¶ "I think that's what people are missing -- the fact that Russia has to rip apart 30 years of integration into the global economy," said Elina Ribakova, the deputy chief economist at the Institute of International Finance.
Edit: sorry, that was actually Nikolai Patrushev, who is as relevant as one can be without being Putin himself. Source: https://www.rbc.ru/economics/29/04/2022/626be2919a7947fc6ea2...
Russia is exporting oil and importing most of everything else. We made it very difficult for them to import that everything else especially in industrial quantities.
Whatever was produced in Russia, like tanks, will have issues with production lines.
Cutting of gas and oil imports will hopefully happen in few years perspective. Russia is already helpfully limiting supply of gas. I would want to see them cut it off fully as they did to Poland, Finland or Bulgaria.
Can the average russian exchange their roubles for gold? Can anyone else legally exchange their roubles for gold?