Why is Russia’s ruble dropping in value?

Rachel Ziemba, follows sanctions and the Russian economy at the Center for New American Security.

Russia, she said, “hiked interest rates sharply, and they also imposed capital controls; they made it very difficult for people to take money out of the country, plus the fact that Russia continued to sell oil and gas, helped to stabilize Russian currency.”

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Ziemba said that “with currencies, it’s always that precipitous nature of a decline that's, you know, more concerning. We have heard evidence suggest that Russians did accelerate their pulling of assets outside of the banking system.”

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Ziemba said that process is taking place.

“Much of Russia’s oil goes to India and China, other emerging markets. So, when we look at it, both Russia’s supplies and the commodities Russia sells are going to a different set of countries than they were two years ago.”

And that’s a direct result of economic sanctions imposed against Russia. The question remains, are the sanctions strong enough to undercut Russia’s economy and have a real impact on Russia’s war in Ukraine?

“This is a case where the restrictive tools can only do so much, especially where as a global economy we still rely on Russian oil and gas. And I think it’s very difficult for a country that is as committed to this sort of military action, it’s very difficult to sway them just on economic terms,” Ziemba said.

The US, along with the G7 countries, have tried implementing an oil price cap to limit Russia’s oil revenues. But it’s still unclear how well that’s being enforced.

Ultimately, Ziemba said that Ukraine’s fate will not just depend on the success of economic sanctions against Russia. It will have a lot more to do with what happens on the battlefield in Ukraine.

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