It looks like it's business as usual and war doesn't really have any impact on global economy at the moment. Prices were going up before Feb anyway.
So what's going on?
1. Capital controls. Russians are legally not allowed to sell their Rubles anymore. This decreases supply and keeps prices up.
2. A healthy dose of foreign currency ($1B/day from Germany alone) gives the Russian central bank plenty of tools to buy Rubles and increase demand for it to keep prices up.
This does not mean that the existing sanctions aren’t working. Eventually Russian factories will run out of machine spare parts and everything will grind to a halt, people will use their jobs, demand for goods will decrease, other factories will have to close due to lack of demand for their goods, their workers get laid off - you get the idea. This takes time though.
Disclaimer: I’m not an economist, but I do have a subscription to the Economist :)
Since the whole world seems to hate Russians right now, I guess no point buying USD and traveling somewhere.
I keep hearing stories how "in just a few months" everything is going to collapse and people will be starving. I doubt it, it's been two months, feels the same so far.
1. Russia produces 12% of the world's oil and has a similar share of global oil exports. [0] Those purchases are now being made in Rubels.[1] This was a direct retaliation to the USA and European sanction efforts. Before this oil was universally exchanged in USD or EUR. This has helped prop up the Rubel.
2. Russia moving back to a gold standard. [2] This is the single most interesting economic move in my opinion. Russia is continuing to buy more of the worlds gold supply. The Rubel is going to be pinned to the Gold standard. This makes the Rubel incredibly attractive as it can be a stable currency and easier to purchase than Gold itself. My personal feeling (contrary to most comments here) is that the sanctions have a terrible effect on the USA and Europe and have contributed to a world where China, India and Russia will be working to destabilize the USD and its allies. Moving away from the petrodollar, SWIFT and other USD centric methods is a very negative proposition for those of us who live in the west.
0. https://en.m.wikipedia.org/wiki/Petroleum_industry_in_Russia
1. https://www.nytimes.com/2022/03/23/business/putin-russian-oi...
2. https://seekingalpha.com/amp/article/4498704-russias-3-step-...
Edit: Spelling
Now they are finding themselves fighting a nation with a direct IV line from the US defense budget (similar to Israel) and that's not a winning position to be in given that the US alone is 10x defense spend - not even counting UK, the baltic states, etc.
The rate may look similar, but it is against a backdrop of a significantly different and far worse economic environment, not least the use of reserves to prop the currency will have depleted their reserves.
In some senses, it is difficult to see why a sanctions attack against Russia would damage their currency that much. The fundamentals are still much the same. I still bought US products after Iraq and I'd still buy Russian products after Ukraine. I imagine most of the world feels similar. There are even some hints that parts of Europe feel that way.
Although, because I'm something of a gold bug, there are some unreliable claims they've re-introduced the gold standard (https://theconversation.com/why-russia-has-put-the-rouble-on...). That is an interesting thing that happened on the way through.
They have some money, but nobody will sell to them. Slightly different situation from their money being worthless because they're outspending their ability to earn hard currency.
[0] https://www.ft.com/content/d7baedc7-c3b2-4fa4-b8fc-6a634bea7...
Obviously that won't work, long term.
Yes, just raising rates to a high enough level is enough. This is macroeconomic policy 101. It will seriously deflate the Russian economy, recent World Bank projections are for a -11% GDP drop (Ukraine: -40% drop). That's a very severe recession. You can always defend a currency at the expense of jobs, it was done in the US too, by Paul Volcker.
Edit: Watch this video for more info: https://www.youtube.com/watch?v=6SjvimH42po
So, the price can be any when you don’t have a free market. In USSR, the official exchange rate was 0,7 rouble per dollar. Black market was 2-3 (might differ, depending on the year, of course).
Recently I have seen photo with X-rates in moscow: USD buying at 70, selling at 300 EUR buying at 80, selling at 100 Looks silly, right? Everyone knows EUR costs more than USD. The reason is the same as in the anecdote above.
Grow a pair: Lift the ban on domestic exploration. Open the floodgates from other countries. People's are dying over cheap gas.
If you own Russian bonds or stocks outside of Russia, you used to get paid in hard currency. You now get paid in rubles. So suddenly the government and major companies no longer need hard currencies. Individual citizens can no longer convert rubles to hard currency. So, a lot less demand.
Meanwhile, the Russian government still has hard currency reserves and gas/oil they can use to buy rubles. Since someone still wants to buy rubles, and there isn't a group that needs/wants/is allowed to sell them, the price is going up.
obviously this can’t go in forever and this is just a crutch
How can you value something that is not transacting? The published “worth” of the ruble seems like a fiction.
1. Russian anticipated the sanctions - this isn't the first time - so Russian had some plans in place. They've been dumping US Fed Treasuries and hoarding gold. That's part of removing USD dependence.
2. Russian has plenty of internal resources with plenty of industry to replace enough (not all) of the sanctioned imports.
3. Russians support Putin at nearly 80%. Sanctions have electrified Russian patriotism. A funny set of Tweets are Russian women tearing up the expensive Coco Chanel products. That's thousands of USD worth torn up because patriotism.
4. Russian has the EU by the balls because Green Energy doesn't and won't replace the Russian exports of oil and nat gas; compounding that is Germany shutting down nuclear power plants exactly when they can least afford it. The next play: demanding payment of the same oil and gas in Rubles rather than USD. The assumption that the USD is supreme is wrong and provably so now with the Ruble rebound.
5. Russian has plenty of allies who leak past the sanctions - like 2/3rds of the world's countries by population - it's LITERALLY only the West who is sanctioning. This is akin to how Cuba was/is embargoed ONLY by the US but not Canada or Mexico.
6. By doubling down on sanctions the US has primarily weakened the Petrodollar which is the ONLY REASON the USD is as strong as it is and the only reason we have the lifestyle levels we have today despite having very low economic production - we'd be closer to Portugal in effective economic strength without having USD reserve currency status. It's a subsidy that has made and still makes us super lazy and entitled.
6a. The US is still living in the delusion of being unipolar and "indispensable". That is no longer reality and sanctions accelerated the move to multipolar.
https://www.economist.com/graphic-detail/2022/03/31/why-is-t...
Behind a paywall but if you turn JavaScript off you can read it for free
We'll know when the funds run out, it's a expensive task to keep it inflated.
tl;dr: Russia is propping up the Ruble with all the means at their disposal
Russia, and perhaps even more China, simply have done without saying a new Bretton Wood where instead of electing a currency the one for anything, a currency based on thin air, handled by a private cleptocratic company remaining in power thanks to propaganda and the army power, they propose one based on something tangible like natural resources and industrial power. Other countries have started to join (like Saudi Arabia, Israel and partially EU so far, the first two accepting renmimbi for oilm tge last for accepting paying Russian gas in rubles) and others "ante litteram" have already tested that and was crushed (like Saddam's Iraq with oil in euros vs dollar, just before Iraqi invasion by the USA or Qaddafi's Libya against the Paris controlled CFA designing a new local pan-African currency).
In the past the west have had the biggest world power in tech, industry, military, science etc than all those start to wane crushed by an economically-driven society. EU lost its place from WWI, USA gain back than and thanks to WWII establish a global power but now de-industrialization, new cyclic big crisis typical of all neoliberals models, with no one left to invade and steal big resources, internal populations reactions (strikes, social unrest, scandals etc) and the growth of big enough superpower, one industrial (China) and one in natural resources terms (Russia) have made the change. Neoliberals need a war to remain in power but they lost such war even before it's start. So countries with neoliberals dominance and their currencies (dollar, sterling and euro) decline while new affirming powers rise. Not that much just because China have an extremely deep food problem: they can't nourish it's own people and their industrial system is still to lean toward export for the west, Russia have natural resources, but it's not anymore Soviet Union, it's economy is in a terrible shape and the need of China for mass production is a big vulnerability. But still enough to make the ruble rise and stabilize.
EU have admitted, while informally/in actions not words, that no solution exists to makes a real embargo on Russian resources, we have started to buy gas in ruble [1] oil is still exchanged [2] with tricks, we still need aluminum, palladium, titanium, ... from Russia etc. Nothing can be done quickly and effectively. Neoliberals have clearly pictured how powerless they are [3] like believers who say "to solve any issue we pry the god of the market that by market magic it will solve our crisis". So Russia know well that like the Korean war no compact front will exists against them. USA know fully well they haven't anymore an industrial complex sufficient to get rid of China quickly and UK know fully well they do not have anymore an empire, they can just hope for USA help in exchange of Commonwealth natural resources witch aren't really much under UK control anymore. On the other side the above described issues impede a quick win so we are there faltering a bit.
The first winner anyway is China: they get Russia, so the biggest reservoir of natural resources and probably high tech Russians military tech they equally need. USA have re-win EU, at least until EU Citizens will revolt against our corrupted government that act against our interest for some third party that prove countless time being no friend of us. So they are the II winner. Others are just looser. Many new movement will happen for India, the Gulf, Iran, Myanmar etc that will surely try to earn something in the game and while "marginal" just by their size and resources they are contended and contenders. That's is. The Rand idea to weaken Russia [4] works at a so high price that dollar can't win. The actual WWIII will probably see no real winner, but probably the least looser will be eastern-shifted and currencies start to reflect that a bit.
[1] https://www.helsinkitimes.fi/world-int/21419-european-commis...
[2] https://mishtalk.com/economics/how-russia-avoids-oil-sanctio...
[3] https://voxeu.org/article/how-solve-europe-s-russian-gas-con...
[4] https://www.rand.org/content/dam/rand/pubs/research_briefs/R...
> We said it right back in February, that it was economic “shock and awe” [https://en.wikipedia.org/wiki/Shock_and_awe], financial “shock and awe”, you sieze the assets of the Central Bank (at least half of them), you sanction the Central Bank so that they can’t operate with contacts with other Central Banks.
> The expectation was, and this is indisputable, because the briefing notes are all there, they’re still up there on the White House website, that that would mean that the Central Bank would not be able to support the Ruble, the Ruble would then go into freefall, that was what was said, Biden subsequently talked about it, you know, the Ruble becoming rubble, 200 Rubles to the Dollar, all that sort of thing, and of course it did not turn out that way at all.
> And the reason it did not turn out that way at all, is because Nabiullina [https://en.wikipedia.org/wiki/Elvira_Nabiullina] did her job as governor of the Central Bank, and prevented it from happening.
> She raised interest rates, I know this is controversial with some people, but I think as an emergency reaction that was absolutely the correct thing to do, she provided the necessary liquidity to the financial system, she made sure that the financial system was operating properly, and she held it all together. And she proved herself to be, this year, an extremely effective financial crisis manager.
> So we have a very stable situation with the Ruble. In fact, the problem with the Ruble at the moment is that the Ruble shows signs of appreciating too quickly. There is a massive amount of cash, of foreign currency swishing around the Russian economy, as Euros and Dollars pour into Russia from Russian energy sales.
> The Russians are prevented now from importing many goods, and of course they are afraid to take this money out and put it in foreign accounts because if they do, it could easily be stolen. So all of this money is piling up in Russia, and there are comments, some members of the government are saying, you know, we should convert it all into Rubles, others are saying, if we convert it all into Rubles that would make the Ruble too strong, it could go to 50, 60 Rubles to the Dollar, and that would not be good for the underlaying competitiveness of our economy.
> [...] and of course the other problem she has is that because of the massive, orchestrated pull-out of Western companies from Russia there are now gaps appearing in the Russian consumer market, there are problems in supply chains for Russian companies, and that is causing a fall in production. And that in turn, is leading into higher inflation within Russia itself.
https://www.youtube.com/watch?v=GgTcha5-Pj0&t=202s
Alternative: https://rumble.com/v11paoj-nabiullina-and-putin-discuss-the-...
https://tomluongo.me/2022/03/28/got-gold-rubles-russia-just-...