President Biden confidently declared that the Russian ruble had become the “rubble” after his unprecedented barrage of sanctions began. Instead, the currency has rebounded back to pre-war levels after a series of aggressive responses from the Russian government and central bank. It is still too early to say if the recovery will be a lasting one but for now, the Kremlin appears to have dodged a repeat of 2014, when sanctions did drastically lower the value of the Ruble.
Ruble has recovered for now
The ruble was expected to sink to new lows in response to the economic backlash that followed the invasion of Ukraine, with some analysts predicting a return to the 1990s for Russia.
For a time it seemed that this might happen, prompting Biden and others to mock the Russian currency as a worthless item and a warning to anyone else thinking they might be able to survive being cut out of the global financial system by the United States .
These comments were overlooking the importance of energy exports and gold, as well as the economic maneuvers Russia and China had planned before war.
Russian President Vladimir Putin intends to make “unfriendly” governments pay for Russian gas in rubles; despite the sanctions Russia is expected to earn substantially more from energy exports in 2022 than it did in 2021.
Like Russia’s flirting with a return to the gold standard, actions taken by the central bank and the Kremlin so far have been dismissed by Western analysts as tricks and stunts meant to artificially prop up a worthless currency.
It doesn’t taken an economist, however, to see that Russia’s failure to cooperate and descend into an economic death spiral is derived from the very real existence of natural resources that remain in high demand.
Russia still has valuable exports
Experts can call it cheating all they want, but the reality of the ruble’s recovery is that Russia has stabilized its domestic economic situation and it has forced a demand for rubles from its trade partners.
Russians are carefully watching the value of the ruble against the US dollar; support for Putin and the war in Russia is still very high, but hyperinflation and economic chaos could change that.
For the moment Moscow has managed to limit the damage and evade that possibility. Even if it is an artificial recovery Russia has ensured that Europe will feel the impact of sanctions along with Russians.
Inflation will be problematic for the Kremlin, but it is also a problem for the White House. Each can at least take this opportunity to blame the other in response to grumbling from the public.
Russia’s economic situation remains precarious but there is no sign of imminent doom. No one should be too shocked; sanctions on Iran and North Korea haven’t resulted in economic anarchy and governmental collapses.
If those countries can survive a barrage of sanctions then Russia, which exports valuable commodities, can survive for the foreseeable future.