HACKER Q&A
📣 TekMol

Why does the Ruble still hold 50% of its value?


Over the last weeks, the Ruble/USD ratio has declined by roughly 50%.

That means that some actors still buy Ruble for 50% of its old value. Who is that? What can they do with the Ruble they buy?


  👤 throwaway_434 Accepted Answer ✓
Creating a throwaway as I have a controversial take on this (maybe even the minority opinion here):

In my opinion, Ruble will become stable in few months (once the dust has settled that is). The sanctions are only imposed by the West (many Asian countries abstained from voting in UNSC). Russia will use Chinese Unionpay in-lieu of Mastercard/Visa and might integrate with Chinese CIPS (alternative to SWIFT). Probably even Indian Rupay in the future. It also has its own homegrown Mir Payment System. The sanctions jolt is going to be temporary. Ultimately SWIFT is going to not be dominant anymore. This is some hard reality that the West has to come to terms with. If anything, these sanctions have fast-tracked establishment of a multi-polar World and rejig of alliances.

Don't forget that other countries, who supported sanctions against Russia (due to coercion or tight coupling with the Western World), are also watching what is unfolding. They are seeing the disparity between how NATO invaded Libya and none of the NATO countries faced any sanctions, while Russia invades Ukraine and faces massive sanctions. Libya hadn't threatened any NATO country nor had it invaded any non-NATO country. It was going through an internal civil war. Yet it was leveled and Gaddafi was dethroned, and lynched in public. So anyone who says NATO is a defensive alliance is just bullshitting.

They'll all have a rethink on what it means to be allied with the West and follow a "Rules based order" that only applies to countries excluding the West. It naturally follows that they will want to balance out their National interests and not place all their eggs in one basket.

One thing is for sure. These circumstances will only boost alternative forms of currency/payment systems. Imagine having the entire payment infrastructure controlled by handful of countries who can act with impunity. For whom, the so called "rules" don't apply but do apply for everyone else.


👤 eyko
Simplifying: contrary to popular (western) opinion, there are countries outside of the US/EU sphere of influence that still trade with Russia, Cuba, etc. And US/EU haven't completely stopped trading with (nor in) Russia.

👤 zaptheimpaler
Maybe because things haven't changed so much. As of today, the Nord Stream pipeline is still functional and pumping gas [1]. India & China are continuing to do business with them. Despite the impression headlines give, a country or currency does not collapse overnight.

[1] https://english.alarabiya.net/News/world/2022/03/11/Russian-...


👤 tacostakohashi
> Who is that?

There are 140 million people that live in Russia.

> What can they do with the Ruble they buy?

Buy their groceries, pay their taxes, that kind of thing.


👤 minusf

👤 300bps
One thing to keep in mind - the price of the ruble doesn’t magically go down with intent.

The quoted price moves with sales. So picture a scenario where literally nobody wants to buy the ruble. The price would literally remain unchanged.

This may sound obvious but it does become a factor in extreme circumstances like this where trading volume is reduced.

Now consider the actions the Russian central bank is using to shore up the ruble. First, they doubled interest rates to 20%. That makes owning an asset like the ruble (that has substantial principal risk) more attractive because you’ll be getting substantial income while holding it. Second, they also ordered Russian companies to sell 80% of their foreign currency revenues. This puts upward pressure on ruble and downward pressure on everything else.

https://tradingeconomics.com/russia/interest-rate


👤 NoPie
In Soviet Union the official exchange rate was close to 1 rouble for 1 dollar. You couldn't exchange them, of course, except in some cases when you were allowed to travel etc.

Now that the currency exchange activities are seriously limited in Russia the exchange rate stops being very meaningful measure.


👤 devKnight
could also be people buying it to speculate. ie: buy it now that its lost value, wait till the sanctions are lifted, these people could be expecting it to be over soon. when the value goes up, exchange back for your currency of choice ie: dollars, euros, etc etc

👤 fxtentacle
In Germany there's already discussions about lifting the sanctions because without cheap Russian gas, people might freeze. If that turns out to be the case, then whoever bought Rubles now at half their regular value is going to make a huge profit on buying gas/oil from that and selling it for Euros.

👤 CPLX
A Chinese company could produce finished steel products for export to the United States, receive dollars in exchange, and exchange them to purchase Russian coal which is then used to produce more steel products.

One example of millions.


👤 nojito
You can only settle certain debts by using the RUB which will then be exchanged back into USD/YEN/GBP/EUR.

When all the debt obligations are settled and no new debt can be allocated, you will see a free fall.


👤 manholio
Russia is an export economy that finances half it's public spending directly from energy sales. Recently it had a very good trade surplus - each year it netted tens of billions of dollars more coming into its economy than going out. Most of those exports are still in place and, while some foreign exchange reserves were frozen, Russia still controls hundreds of billions worth, allowing it to support the ruble.

It also very hard to stop this flow of foreign currency: as a permanent member of the UN security council, Russia cannot be subjected to is an embargo, all nations are free to trade with it from the point of international law. So assuming US, EU, Canada, Japan etc. all stop buying Russian oil and start buying from other sources, then that oil will be redistributed onto the the global oil market, maybe a few pennies cheaper, but Russia will still get it's money, now at record high prices.

A thing that could help is stopping the gas purchases, that, due to limited infrastructure cannot be routed to other countries, but will clearly damage european economies. Also, pressure on China, India and other large economies, threats of secondary sanctions, making them chose if they want to trade with the western bloc or Russia, all these could really damage Russia. There were no substantial actions in this regard because it would hurt the west too, China is unlikely to simply roll over.


👤 lordnacho
Former FX trader here. A 50% collapse is huge, especially over such a short time. It's not like some WSB stock that represents just one little company, this is a whole economy.

Now I'm not familiar with what exactly is allowed and now allowed now that they've been disconnected from SWIFT, so that's something someone at a bank might want to answer.

One thing to look at that this might be temporary. If the sanctions work and Putin gets deposed, or if he wins and the West decide to just go back to normal and buy his natural gas, then you kinda want to have bought a bunch of Rubles cheaply that you can use in the post-war Russian economy. Those Rubles will suddenly become worth a lot more, which speculators will be thinking about. It's a bit of a question whether you can collect interest on your carry trade, but if you can and rates stay high you might think it a worthwhile investment.


👤 bigodbiel
Simple: ruble conversion to USD or EUR is extremely limited; iirc only $10k can be withdrawn from dollar denominated accounts, currency exchange is largely restricted for business and individuals, the stock market remains closed, large businesses have been forced to sell foreign currency reserves, the Kremlin plans on repaying foreign debts in rubles only (ie technical default).

The hope is that the west unfreezes its Central Bank reserves, meanwhile they are buying time.


👤 LatteLazy
Russia exports a tonne of gas and oil for a start. And there are no real sanctions on that yet because Europe needs to buy it or freeze in the dark. And even if the west did sanction those, they could still sell to China or 100 other countries.

And remember, if Ruble's are half price right now, then anything outsiders can buy with them is half price too. That's a boon for anyone buying/selling gas or oil.


👤 sgjohnson
They passed a law that made ordinary people convert all their currency holdings to at least 80% RUB, therefore artificially creating demand for RUB.

👤 londons_explore
> Who is that? What can they do with the Ruble they buy?

I purchased Rubles to buy stocks in some Russian companies. Since they're very cheap right now, it's really betting on the russian economy recovering post-war.

I also thought now was a good time because large investors are being pushed out by the threat of government action if they don't, and threat of bad PR. So there are a lot of people selling large quantities at deep discounts.

The downside risk is that my investments are removed from me by russian government rules (nationalisation), by western sanctions forcing me to sell, or simply a collapse of the russian economy and hyperinflation. But I think it's worth that risk.


👤 willcipriano
You can buy oil and gas with rubles can't you?

👤 mytailorisrich
Russia has 140 million people, the world's 11th economy, and, despite the impression one might have watching the news, only US/Europe (plus usual dependencies in Asia) have imposed sanctions on them. That is to say, there is still a lot of trade between Russia and the outside world (and the central bank does not seem to be printing money like mad).

Edit: It looks like the 50% drop only last a day. The rubble has since steadily somewhat recovered to 'only' about a 30% drop, which may also be due to Russian government intervention.


👤 mrfusion
This post is kind of adorable.

You can’t blame someone for thinking this if they’re drinking from the media firehouse. For example a popular post on reddit right now: https://old.reddit.com/r/interestingasfuck/comments/tbmdke/r...


👤 dukoid
Today a "linear" fall of the heights seems to have ended. It looked like somebody with the ability to sell a lot of Rubles was sending a message -- until now. Graph: https://twitter.com/dukoid/status/1502248440499216393/photo/...

👤 true_religion
I mean… Russia is still a superpower that spans two continents and is a capable of encircling the defenses of mid sized European states within days.

It’s not as if Russia has no power, no population, no resources, and no economy simply because a few sanctions were placed on it.

Plus, Russia put into place hard restrictions on exchanging currency keeping the value from plummeting out of mere panic.


👤 vintermann
Russia is a big country. It produces many things, despite decades of oligarchs capturing as much as they can and stashing it abroad.

No country that produces real things and issues its own currency needs to have a worthless currency. If it does, it's usually because the rulers are in desperate extraction mode, trying to ship as much value abroad as quickly as possible with no regards to the medium term consequences (either to creditors at gunpoint, or to private accounts).

That may still happen in Russia, if Putin can't keep the oligarchs in line. But he pretty much has, since 2003. It can also happen in the slightly longer term if Russia strikes a desperate deal with China which goes wrong (that's basically what happened to Venezuela).

But barring that, there won't be hyperinflation in Russia, "only" an Iceland-style one time devaluation (plus sanction-derived shortages, which Iceland dodged). Economically speaking, Putin can probably shield regular citizens from even Soviet-era scarcity, since the economy is still more productive despite oligarch looting. Whether he will is another matter.


👤 throwaway4good
Over a one year period, the ruble is still doing better than the Turkish lira ...

👤 usgroup
I think what’d be nice in these politics debates is to see people literally listing and then referencing the facts they are relying on to make their arguments.

Not always, just for these emotional, shouty, hyperbolic threads.


👤 vbezhenar
You can't buy USD in Russia right now without breaking the law. You can only sell USD. So it's obviously the main thing that keeps USD/Ruble ratio from falling.

👤 colechristensen
Russia has $640 billion in foreign currency, a functioning economy with significant petroleum exports and many trading partners not aligned with NATO.

👤 achempion
There is a rule [0] which forces Russian companies to sell at least 80% of currency revenues (including all new incoming payments).

0: https://cbr.ru/eng/press/pr/?id=35755


👤 specproc
People in Russia, with savings in dollars, that need to buy things.

👤 aerodog
It's as though OP takes joy in dumping on the currency 150 million people, mostly poor, use for their livelihood.

We will look back on this period as a time of mob-think hysteria against Russians. One of those times where even if you say something decent about Russians, you may feel compelled to preface with "I'm no fan of Putin, but..."


👤 pseingatl
Russian gold reserves.

👤 throwaway_434
HN has limited me so I am posting a comment here. First of all, I am happy that people are actually engaging instead of dismissing the comment as Russian Propaganda (though few have). Secondly, there are some important misconceptions:

1. One commenter said that "Nato did not invade Libya" and quoted UNSC resolution as the basis for intervention.

This is not true at all. NATO did invade Libya on 31st March 2011. The UNSC resolution enforced a no-fly zone. It did not order a NATO invasion. Please read the resolution again (UNSC 1973). NATO flew 26,500 sorties. NATO invasion ended on 31st October 2011. Article 5 wasn't invoked either (the only time it was invoked was when 9/11 happened). So there was no need for NATO to intervene. But it still did.

Even the no-fly zone was farcical. It was meant to protect civilians. General Carter Ham (Head of US Africa Command) said that he was unable to differentiate between civilians/rebels/Gaddafi forces etc [1]. It was up to the pilot to take a call on whether he wants to bomb or not. This was reported in April of 2011 as well where NATO planes erroneously bombed row of tanks that belong to the rebels [2] clearly violating UNSC resolution of protecting "civilians".

In fact, the Indian and Brazilian representatives made the same point, when the UNSC 1973 was tabled, that the resolution was too vague and poorly drafted. That is why both countries abstained from voting for the intervention in Libya.

[1]: https://www.wired.com/2011/03/u-s-general-we-wont-help-libya...

[2]: https://www.france24.com/en/20110408-doubt-over-nato-militar...

2. One commenter asked: "Do you think the Cuban Missile Crisis looked anything like what we're seeing in Ukraine right now?"

We almost faced Nuclear Armageddon. So it was far worse. Right now, the situation is lopsided with Russia having clear dominance over Ukraine when it comes to nukes. Cuban Missile Crisis was even worse as it was two nuclear powers facing off. Check out "Black Saturday". US Navy dropped "signaling" depth charges on Soviet B-59 (which was a nuclear submarine). The captain of the submarine thought the War started and wanted to launch a nuke. It was averted thanks to a Commander who was onboard. If not for the Commander, it would have lead to end of the World as both countries would have launched counter nukes.

3. Why aren't you condemning Dictators/Authoritarians/Totalitarians etc?

I am condemning them. But I am sick and tired of the hypocrisy that we in the "Free World" exhibit. We try to project that we are "Angels" and here to rescue people from all evil. Yet we are the biggest perpetrators of violence in the World.

It is the "Free World" which invaded 84 countries, killed millions and displaced millions more. Hitler/Stalin/Mussolini/Putin/Mao/etc etc are all faces of evil. Just by statistics alone, we beat all of them combined. It is high time we acknowledge this and act on it. Stop unnecessary Wars. Stop setting precedents for others (Dictators/Extremists) to justify their wrongdoings.