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It seems that the ruble is now in free fall. This week it fell by about 6%, and if we take the indicator for a month, then by almost 15%, the expert writes Timothy Ash, substack.com.
Approaching 112 against the US dollar, the ruble is now at its lowest level since the panic that followed a "sudden" full-scale invasion of Ukraine in February 2022 - no surprise to some, such as your humble servant, who predicted a full-scale invasion back in 2015.
The ruble appears to be weakening due to the Biden administration's decision to tighten the sanctions regime against Russia. This could be seen over the summer in the sanctions against Moscow's MOEX exchange, then the tightening of secondary sanctions against Russia, and then over the last week, when the US finally imposed sanctions on Gazprombank. The latter is the main channel through which Russia conducts operations with oil and energy carriers. This week, the G7 also pushed for stronger sanctions against Russia's shadow oil fleet. All this makes it difficult for Russia to carry out trade operations.
The driving force behind the G7's recent actions appears to be a concerted effort to increase the economic costs of the war in Ukraine and force the Putin regime to negotiate with the new US administration to weaken Russia's bargaining position in those negotiations in favor of Ukraine.
It also gives the impression that China is working to help the G7 in this, rather than doing everything it can to help Russia reduce pressure on the ruble. China is likely to be angered by Russia's move to draw North Korea into the conflict, further removing North Korea from Beijing's strategic orbit. China also likely wants to be seen as useful to the Trump administration, seeking to win friends there to help ensure tariff moderation.
All of these latest Western sanctions efforts come as Russian reserves have dwindled after more than 1000 days of war, and the Central Bank of the Russian Federation has lost access to at least $330 billion in foreign exchange reserves held in G7 jurisdictions. Therefore, it has fewer foreign exchange reserves, including the ruble.
For Russia and Russians, a weak ruble means higher inflation, as a result, higher rates of the Central Bank of the Russian Federation (already at 21%), lower growth rates and, finally, a lower standard of living for Russians. This will result in the costs of the war ultimately falling on the Russian population, which may make Putin think twice about continuing the war. The very fact that Putin used North Korean troops in the Kursk region shows that he is nervous about the human and social cost of war to Russians. He shows vulnerability.
