Why Putin Is Worried About Russia’s Volatile Ruble

The ruble has slumped so severely this year that Russian President Vladimir Putin issued a rare verbal intervention, telling the central bank and government to work together to halt outflows and ease volatility in financial markets. The currency, among the worst performers in emerging markets in 2023, has suffered from a deterioration in foreign trade amid a raft of international sanctions over its war in Ukraine. The plunge threatens to exacerbate inflation, eating into living standards ahead of what’s meant to be a showcase presidential election, and has already revived discussions about whether to reimpose some capital controls. So far, the government has only recommended major exporters sell more of their foreign-currency revenues on the market — voluntarily for now — while the Bank of Russia made an emergency rate hike.

The ruble, which has a floating exchange rate, has weakened about 23% against the dollar so far this year, placing it alongside the Turkish lira and the Argentine peso as the worst emerging-market performers. (The ruble was weaker than 100 against the dollar for a while in August for the first time since shortly after the start of Russia’s February 2022 invasion of Ukraine.) The deterioration in foreign trade has been one of the main reasons for the depreciation. Flows of imports are up year-to-date, while restrictions on Russia’s energy sales, including an oil-price ceiling, have led to a steady decline in exports. As a result, the inflow of hard currency is falling, but the demand for it remains strong from both importers and households, which keep moving their savings abroad.