Igor Zaytsev's blog

So the Russian Central Bank, which, as some people in Russia believe, is managed by the people subscribed to the western views on economy, is desperately trying to weaken the ruble which grows uncontrollably strong. The reason is of course the western sanctions that prevent Russia from importing western products, and thus creating the demand for western money. Other reasons include the capital control measures Russia has implemented, preventing the outflow of currency from Russia abroad, as well as the requirement of for the exporters to exchange 80% of their foreign currency profits into rubles (in fact, they are struggling to find a buyer for USD, EU etc.). These are the reasons, among others, as presented in the Russian mass-media.

For these reasons, ruble is keeping to climb. The Central Bank already reduced the rates, and it seems will continue to do so, in the attempts to weaken the ruble.

[What I don’t understand, is what happening with the “gas-for-rubles” scheme. Does euros received converted into rubles on Russian exchanges? If that would be the case, than it seems no matter how CB will try to strengthen the euro domestically, it will continue to crush inside Russia. Especially given the situation EU’s economy is in (inflation, commodities shortages, flight of investments out of the EU). Because, as it is stated in the Kommersant article (dated April 12th), if all Russians would exchange all their rubles available on their deposit accounts into euros and dollars, after one month Russians will run out of rubles.]

The aforementioned article makes a note, that exporters left with only one option, if they want to avoid amounting the useless dollars and euros: switch to ruble payments instead. This of course, would strengthen the ruble even more. Which would lead the Central Bank to lower the rates all the way down. Personally, I’m in opinion that high rates economies are a dead-end economies. “Just put some money in bank, or purchase some bonds, and the entire country’s population will be put in debt and will left no choice but to work, so you will make money doing nothing”. So I’m totally for as lower rates as possible, so the population could buy affordable housing, and take affordable credits for their small business.

But for some reason, the Central Bank has decided to start quietly buying foreign currency on Russian markets (source), in order to keep the ruble from rising. What will they do with that money? How good will it keep its value over time? And why would you keep Russian exporters interested in being payed in western currencies, thus supporting the economy of “unfriendly nations”? Well, I’m not an economist, but it does seems to me Russian Central Bank has some strong feelings towards the western currencies. They already lost $300B of “not-theirs” money, and now they want to do it again? They do it in secret, knowing public won’t approve, but still bear no responsibility for their actions, even if have been told about the dangers and negative effects of those actions.

It seems, Russian currency and economy is growing stronger and more resilient not because, but despite the policies, implemented by the Central Bank. It’s hard to attribute any successes to the government and its vision. At best, their incompetence and mediocracy is just not enough do do any real damage in the situation where Russia finds itself positioned so optimally, while the West is actively sabotaging itself as best as it can. So again, as in one of my Ukraine War analyses, it’s not the question of who’s better, but who’s worse. The one who is not-as-bad, will win.