Despite the invasion of Ukraine and the ensuing international sanctions, Russia has managed to restore the rouble to its pre-war level. Gas and oil exports played a major role in stabilizing financial markets.
Exceptional measures to help the ruble recover
After falling sharply in the wake of economic sanctions imposed by Europe, the United States and their allies, the ruble has returned to its pre-war level in Ukraine. It now takes 84 rubles to obtain one dollar, compared with over 140 at the beginning of March.
A number of exceptional measures have been taken by Russia to revive the rouble, starting with the provision of liquidity by the Russian central bank. Gas and oil exports enabled the Bank of Russia to secure a flow of foreign currency, by forcing importing European countries to exchange their euros for rubles at banking institutions such as Gazprombank.
In addition, the US Treasury's ban on banks accepting Russian payments in dollars is preventing the settlement of a $649.2 million debt, prompting the Russian Ministry of Finance to announce that it would pay holders of its dollar-denominated bonds in rubles.
The crucial role of oil and gas exports
According to Elvira Nabiullina, Governor of the Bank of Russia, a fall in GDP is inevitable, but the country's economy should return to a growth dynamic.
The rise in gas prices, combined with the continuing high level of energy exports and the decline in Russian imports, enabled the current account surplus to reach a record $58 billion in Q1 2022. This figure could rise to $200 or even $250 billion over the full year.
According to the governor of Russia's central bank, the asset freeze imposed by the USA, Europe and their allies has not prevented Russia from retaining sufficientdiversification assets. At the start of the year, 21.5% of its assets were invested in gold, and 17.1% in Chinese debt. In 8 years, Russia's gold investments have doubled.
At the beginning of 2022, 33.9% of the Bank of Russia's assets were invested in euros, and only 10.9% in dollars, i.e. 2 times less than last year. 15.7% of its European debt is frozen in Germany. From now on, the Russian central bank will no longer disclose the breakdown of its assets by currency, but will confine itself to communicating the amount of its reserves on a weekly and monthly basis.