Market watchers have been struck recently by the strong rebound of Russia’s national currency, the ruble, after international sanctions only lead to a temporary weakening of its valuation.
Despite stepped up pressure from European and American regulators — and a handful of other global authorities — the rush to crack down on Russia’s ruling classes via their wealth has come up short.
Although around 500 Russian nationals are listed on U.S. sanctions rolls, only half of the nation’s billionaires have found themselves sanctioned by America, the European Union and the United Kingdom.
That’s lead to a soul-searching review of both international policy on how to punish Russia for its unprovoked invasion of Ukraine, and a growing chorus of criticism of what plans that North Atlantic Treaty Organization has in place to stop further expansion.
Russian President Vladimir Putin is a prime example of where sanctions have missed the mark.
A longtime KGB official, Putin has managed to shake-off any obvious financial harm thus far, primarily because his assets are either in the government’s name or are so obliquely hidden that regulators cannot reliably trace them.
But regulators were sure they had accomplished punishing Russia’s overall clout via weakening the ruble.
The currency dropped to 0.007 rubles per American dollar on March 8, essentially crashing the coin’s value, and the Russian stock indices were closed for weeks.
The Ruble Regains Pre-War Levels
Now, however, the ruble has rallied. As of April 7, the currency was trading at six-week highs, essentially reverting to pre-war levels. All Russian stock markets are also back up, and have largely shrugged off a new wave of sanctions.
The rally is a major reversal of fortunes for Russia’s wealthy elite — and a substantial blow to global regulators.
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An entire generation of oligarchs has either been put under sanctions or is worried it will be, and when the ruble was at its lowest, there were sure signs that Russian bad actors were laundering money via rubles on cryptocurrency exchanges.
Now, however, many Russians have been flocking to destinations that either do not recognize sanctions or have a tenuous relationship with the United States and Europe.
Many have staked out temporary homes in Dubai, recent reporting suggests, and are trying to convert their assets into things more readily accessible than the enormous yachts, soccer teams and real estate holdings being seized regularly by American and European authorities.
What’s Behind the Ruble Rally
The ruble has found a boost after Russia’s plentiful supplies of natural gas and oil found new buyers around the world — and some help.
American authorities have called the ruble’s rebound “a lot of manipulation,” and some experts have said it also is benefiting from the Russian central bank controlling currency flows.
Promsvyazbank, a state-backed bank that was formerly private, has issued guidance saying that exporters buying foreign currency has pushed the ruble to new highs.
The bank said April 7 that it “cannot rule out” the possibility that the ruble could soon be worth a steady 74.00 to $1 in the upcoming week, as it regains solid ground.
It is currently being traded at 78.00 rubles to $1 dollar, regaining similar levels to its value before the Russian/Ukrainian conflict began over a month ago.
What’s pushing the rally? It appears to be a massive interest in Russian oil reserves, which Bloomberg Economics now thinks will actually see inflows grow by a third, thanks to higher oil prices and despite the war and international sanctions.
The practical effect of the ruble regaining its value is that it both bolsters Putin’s position with Russians and allows wealthy holders of ruble-backed assets to trade them now at their original — or higher — value.
“For the politicians, it is a good PR tool by saying that sanctions don’t have any impact. And it will help to limit the inflation impact,” Guillaume Tresca, a senior emerging-market strategist at Generali Insurance Asset Management, told Bloomberg.