New U.S. sanctions push the ruble to its lowest since spring 2022

The United States has imposed the most wide-reaching range of banking sanctions on Russia since spring 2022 (read more here), hitting leading state institution Gazprombank, which had remained connected to SWIFT and conducted settlements in euros. The fallout of the potential disruption on Russia’s energy trade pushed the ruble to its lowest level against the dollar in two-and-a-half years.

• In exchange trading, the ruble slid below 104 against the US dollar the day after the sanctions were announced — the weakest value since March 2022, when it plummeted at the start of the invasion. The official dollar rate, which the Central Bank sets using over-the-counter transactions, has dropped more than 3% to 103.8 rubles. Against the Chinese yuan, the ruble also reached its lowest level in a year at 14.2 rubles.
• Apart from sanctions, the ruble is under pressure from geopolitical tensions over the escalation of the war in Ukraine, Moscow’s ramping up of spending, and demand for the currency related to exporters’ regular tax payments.
• Another drop in the value of the ruble is bad news for Russians at a time of high inflation. Over the course of November, inflation in Russia could increase by more than 1%, reaching 9% on an annual basis, against the Central Bank’s estimate of 8-8.5%, according to the authors of the authoritative economic Telegram channel MMI. In such a situation, it becomes even more likely that the Central Bank will raise rates yet again in December. Finishing the year with rates at 23% is entirely possible.

Why the world should care

The latest fall in the ruble will first and foremost hit Russians via increased prices for various goods. The war has already caused a disbalance in the Russian economy, and the main consequences have been a sharp rise in prices and prohibitive interest rates on loans in an effort to cool the overheating economy.