Meanwhile, the Ruble is up from where it was just before the invasion. There is a sudden drop off during the month following the invasion in late Feb when sanctions were applied, but risen since then. It's currently sitting at a 5 year high.
https://tradingeconomics.com/russia/foreign-exchange-reserve...
So not sustainable. They are selling foreign currencies to keep the ruble alive.
1. https://www.federalreserve.gov/data/intlsumm/current.htm
2. https://home.treasury.gov/data/us-international-reserve-posi...
I'm not so sure about that. There were a bunch of news outlets warning that Gazprom is on the brink of a massive default. Gazprom, of all companies.
If the company that subsidizes Russia's ruling regime can't make their payments in spite of sitting on a huge pile of oil and gas, that does not bode well for Russia's economy.
As for the Euro, it's currently at a 20-year low, if that's an answer to you. Since the balance of payment is positive, there's probably no reason to be pessimistic in the long term.
The Yen is at a 24 year low vs USD. The Yen is down 15.9% YTD. That is just an incredibly fast erosion and we're only halfway through the year.
Is there a yearly pendulum that I'm not aware of? Because if not, we've also only 21% through the century, and we've barely scratched the millenium.
https://tradingeconomics.com/russia/gold-reserves
Or roughly $128.9 billion USD in gold reserves:
https://www.wolframalpha.com/input?i=2301.64+Tonnes+of+gold+...
https://m.timesofindia.com/business/cryptocurrency/blockchai...
It is far from trivial to move that kind of stock.
I say this only because I have a sizable amount of rubles from an earlier trade, and *I have no way to exchange them for USD despite the exchange rate.*
The price you see is a reflection of the price accepted by those able and willing to trade rubles which is currently *a limited subset of the world*. Sure, they have a massive trade surplus due to the commodity shortage, but a lot of the move is engineered through capital controls.
(1) Western Ruble electronic trading is dead. It's near impossible to move rubles with any size. [https://www.risk.net/our-take/7946561/russian-ruble-trading-...]
(2) Moscow is forcing companies to buy rubles.
(3) Moscow limited the amount of dollars that Russians could withdraw from foreign-currency bank accounts and barred banks from selling foreign currencies to customers. [https://www.wsj.com/articles/russias-economy-is-tankingbut-t...]
(4) Moscow has fixed the price of gold. [https://www.kitco.com/news/2022-03-28/Russia-sets-fixed-gold...]
So really, the "appreciation" you see is compensating you for the headache you'll have to go through to do anything meaningful with rubles.
Meanwhile, Russian inflation is at 15% and GDP is collapsing. Russian imports have collapsed because *no one really wants rubles*.
There is so much propaganda and "Russia-bad" going around in the media, whether you think it's deserved or not is irrelevant to the quality of journalism taking an extreme nosedive.
Elvira Nabiullina (Russia central bank chair) is IMHO one of the smartest central bankers in the world right now. Much better than "transitory" Powell.
She tried to quit at the end of February but was not permitted to.
Actually it isn't that much of a joke today - according to the new wartime law Russian government can compel any business to produce the amount of product/service the government wants with the business having no right to refuse, and the government can force people to work overtime, weekends, holidays with the government defining what payment, if any, to happen to the business and the people.
Going back to Russia's economy, the future investment is dying. Its airplanes are not getting new parts. Siemens isn't repairing any equipment. The full effects of the sanctions won't hit for another few years.
This only works if you have a developed enough domestic economy to supply everything you need. Assuming you’re exporting more than food, you’ll need resources to produce anything, and if that’s expensive then your theoretically cheap export pricing can’t be so low.
Russia’s domestic suppliers aren’t well rounded, but they do have energy independence which is a major factor going for them.
so before you dismiss all that "propaganda" make sure you don't spread it yourself.
Yes, it means no luxury goods from the EU and no tech from NorthAm. But the embargo isn’t as broad as one might imagine.
There are some important tool and equipment from the EU and NA that if sanctions remain for years could result in a mega Cuba situation where lots of things are under maintained.
Russia has capital controls. Exporters are forced to buy roubles with 80% of their foreign currency, among other restraints to the free trading of roubles.
If you traded roubles on the black market, you'd get the actual price, and it's much lower there.
Edit: also, 80% export rule was lifted recently
This is simply not true. "Black market", in the form of p2p crypto, had the rate close to the official one since the beginning of the war. Check your sources, they might be biased and feed you bullshit
I actually banked on that a bit, enough to offset losses on other parts of my portfolio.
The prices in Russia reflect about 1.5-2x ruble fall against dollar since the invasion. The official ruble/dollar ratio is maintained by draconian measures/restrictions against exporters and population (plus significant depression of economy which was consuming a lot of imports, like the car market falling 6 times because most of the foreign car makers/traders are gone, similar situation in IT for example, ie. Russian economy collapsed to becoming only natural gas and oil pump). Very similar to the situation back in USSR when dollar was only 0.63 of ruble, yet it wasn't possible to buy any dollars at that price.
Wrt. original post - it was obvious even back in February that the faster Ukraine wins the less hit Europe will take. Europe has been dragging its feet on military help for Ukraine and as a result dragging itself deeper an deeper into an economical crisis. Leaders of France, Germany, Italy still seem to hope that Russia will take a piece of Ukraine, and after that the things will be back to the good old times. This naïve thinking has already obviously failed, yet they are still clinging to it.
[0] https://www.bloomberg.com/news/articles/2022-05-17/in-ussr-f...
A massive economic sanctions package, which eliminates their ability to import goods and services while having their sole export stockpile foreign currencies, does help level the balance of trade.
But that does not mean the economy is not tanking though.
Outside of Russia, nobody will take your ruble. In Russia, somebody may, but that's not going to be a bank and the actual cost will be much steeper than advertised rate.
(US dollar skyrocketed to almost 100 ruble in March until Russian government decreed its officially worth 60 except now you basically can't legally buy western currency. HODL mode I guess?)