THE BELL WEEKLY: Russian Ruble surges under Trump

Hello! This week we analyze the Russian ruble’s strong performance during the first three months of Donald Trump’s presidency — and why it is unlikely to last. We also cover lengthy prison sentences for independent journalists and look at why Russia took the Taliban off its terrorist blacklist.

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Soaring ruble set to come back down to earth

To the surprise of many, the first four months of 2025 have turned out to be one of the best periods for the Russian currency in recent years. The ruble, which ended 2024 with its worst performance since 2022, has suddenly started to strengthen, boosted by a host of factors. A strong Russian currency helps slow inflation, but also hits exporters and the Russian budget. Analysts expect the period of strength will not last long and that the ruble will start to weaken again soon.

Since the beginning of 2025, the ruble is up against the U.S. dollar — one of the key benchmarks for assessing the Russian currency — by about 21%. While in January the dollar was worth around 103 rubles, it now trades at around 81 — a level not seen since spring 2023. Russian consumers have only benefited from this: they began to buy foreign holidays at more affordable prices, and inflation inside Russia has begun to slow down, according to the Central Bank’s analysts.

There are many reasons behind the recent strengthening:

1. Initially, the ruble climbed on political factors — chiefly, the return of Donald Trump to the White House. The first official talks between Moscow and Washington in three years gave investors hope for a possible easing of U.S. sanctions, increasing interest in ruble assets and the Russian stock market. Russian shares, however, proceeded to lose all of those gains as progress on a possible Ukraine truce and sanctions relief appeared to peter out.
2. In March and April, exporters made major tax payments which additionally supported the ruble, Russian analysts said. Corporate taxes increased in Russia this year meaning even larger payments, which also played a role.
3. A decline in imports has also pushed the ruble higher. In the first quarter of 2025, imports were down by 3% year-on-year. The biggest contributor was falling vehicle purchases. This was due to a strong increase in the recycling fee (which is ‘sewn’ into the price of a car) from 2025 and a general decline in demand amid high inventory levels and high borrowing costs (with the base rate still at a two-decade high of 21%), the Central Bank said.
4. Russian companies are also seeking to refinance exorbitantly expensive ruble-denominated loans using more affordable yuan-denominated loans, which results in additional conversion of foreign currency into Russian currency. For example, the average rate for a loan of up to 30 days in rubles is 29.49%, while the average rate in yuan is 4.99 per cent.
5. The global trade war has hit oil prices, causing the Russian treasury to miss oil and gas revenues. Consequently, the Russian finance ministry has had to sell foreign currency under the budget rule. When oil is above a certain cut-off price, windfall profits go into the sovereign wealth fund, but when they fall below that, the fund is drawn down to replenish day-to-day spending. (We previously explained more about that here). Drawing down from the fund essentially means buying rubles, something that could also be supporting the Russian currency.

Exporters are not happy about the strong ruble, as it means their products are less competitive internationally. The contribution of exports to the revenue structure of metallurgical companies, for instance, is huge. Exports make up 85% of Nornickel’s revenue, and 70% for aluminum giant Rusal. Oil exporters' revenues also depend on the ruble exchange rate, which, accordingly, determines the amount of taxes paid to the Russian budget. When the ruble is weak, revenues and payments to the treasury are higher. “The stability of the budget is the result of fine-tuning: when the ruble exchange rate is above 90 per dollar, revenues grow, while below, there are problems. Therefore, the government will keep the ruble weak, but not failing,” says Daniil Tyun, senior analyst at investment and analytical company AMCH.

Despite the ruble’s recent strengthening, analysts believe the currency is set to weaken. If the price of Brent crude oil falls to $50-60 a barrel due to the inevitable blow to global economic growth from the trade war (it is currently trading at $66 per barrel), the ruble may return to 95-100 against the U.S. dollar over the summer, further slumping to 100-110 during the fourth quarter,according to the asset management company Astra. At the moment the ruble looks excessively strong, so by the end of the year it could weaken to 95 against the dollar, Raiffeisenbank analysts expect. The economy minister is preparing for 98.7 rubles per dollar by the end of the year.

Why the world should care

The dollar exchange rate still plays an important role in Russia, despite sanctions. The cost of many imported goods and services are still influenced, directly or indirectly, by that rate. A suddenly stronger ruble has been a boon for thousands of Russian families, but it is not likely to last much longer.

More than five years in jail for being a journalist

Journalism continues to be a dangerous profession in Russia. Last week, a Moscow court sentenced four journalists to five and a half years in prison on charges of collaborating with the Anti-Corruption Foundation (FBK), an organisation founded by Alexei Navalny and outlawed as “extremist” in Russia.

• The journalists — Antonina Favorskaya, Sergei Karelin, Konstantin Gabov and Artem Krieger — were found guilty of “making and editing videos and publications for FBK”. The prosecutor demanded that the journalists be sentenced to 5 years and 11 months in prison. The trial was held behind closed doors.
• All the journalists were arrested back in 2024. The first to be detained was Favorskaya, who worked for the SOTAVision publication as a video journalist. She actively covered Navalny's trials and filmed his appearance, via video link, at a court hearing the day before his death. The footage she shot became the last video of Navalny, whose death in an Arctic prison colony is characterized as premeditated murder by his associates.
• Gabov, who had also worked with Reuters and Deutsche Welle, and Karelin, who worked with the Associated Press and Deutsche Welle were arrested next, and then two months later, Krieger, who worked for SOTAvision was detained. Krieger’s uncle, opposition activist Mikhail Krieger, was already in prison, serving a seven-year sentence on charges of “justifying terrorism”. All of them are recognized by Russian human rights group Memorial as political prisoners.
• The journalists slammed the case against them and the state of media freedom in their final statements before the court, according to transcripts published by their lawyers. “Independent journalism is equated to extremism,” said Gabov. Prison censors blocked the publication of Favorskaya's final testimony, which is known to have lasted 40 minutes and consisted of 37 pages.

Why the world should care

Even if Russia is able to negotiate a U.S.-brokered truce with Ukraine, repression, which has been ratched up to its most intense since the Soviet era, will not disappear. A five-year prison sentence for professional journalism is vivid proof of this.

Russia legalizes the Taliban

The Taliban, banned as a “terrorist organization” in Russia for more than 20 years, has been legalized and had the label expunged by Russia’s Supreme Court, in another sign of warming ties between Russia and the Islamist group. The development is not surprising. Over recent years, the Russian authorities have been actively meeting with Taliban officials and their inclusion on the terrorist blacklist was increasingly becoming an unnecessary and awkward formality.

• Until last year, Russia had no mechanism to remove organizations from the terrorist list. But thanks to legal amendments passed by parliament — which were seen as being introduced specifically with the Taliban in mind — organizations deemed to have “ceased carrying out activities aimed at propaganda, justification and support of terrorism” and stopped violations of Russia’ Criminal Code were allowed to be “legalized.” The Taliban became the first organization on which the authorities used the new mechanism. However, their exclusion from the terror list does not mean that Russia has officially recognized the Taliban government in Afghanistan.
• Russia added the Taliban to its list of terrorist organizations in 2003. The Supreme Court's judgement on the matter said, among other things, that the Taliban was an “extremist Islamic movement” that “maintains ties with illegal armed formations operating in the territory of the Chechen Republic”. The Taliban did indeed have close contacts with Chechen separatists and recognized Chechnya's independence from Russia.
• But as the U.S. war on Afghanistan dragged on, largely because of the Taliban's successes in guerrilla warfare, the Russian side began to establish contacts with a wing of the group seen as more moderate. In the late 2010s, Russian diplomats even participated in negotiations between the Taliban and the official Afghan authorities in Moscow. So in 2021, when the Taliban seized power in Afghanistan, Russia already had good relations with the movement. In recent years, the Taliban, even with their official designation as terrorists, have actively attended Russian official events, including the St. Petersburg International Economic Forum.

Why the world should care:

Facing international isolation over the invasion of Ukraine, Russia wants to see Afghanistan as an international partner. But so far the scale of economic interaction with the country is extremely modest — only $220 million in trade turnover.