Ruble Rebounds Sharply Against Dollar Following Putin’s Decree on Gas Payments
The Russian ruble staged a significant recovery against the US dollar, strengthening past the 100-ruble mark to trade at 99.50 on Friday. This rebound followed a decree issued by President Vladimir Putin that introduced new payment mechanisms for European purchasers of Russian gas, effectively reopening channels for foreign currency inflows. The ruble appreciated by 1.5% against the dollar in over-the-counter trading, according to data from various banks. It also saw a notable gain of 2.4% against the euro, surpassing the 14-ruble threshold on the Moscow Stock Exchange.
Putin’s decree provided alternative avenues for European gas buyers, including nations like Hungary and Slovakia, who had previously relied on Gazprombank for their transactions. These buyers could now convert their payments into rubles through other banks not subject to sanctions. This move addressed the disruption caused by US sanctions imposed on Gazprombank on November 22, which had triggered a 15% decline in the ruble’s value against the dollar. The ruble’s resurgence marked its strongest weekly performance in four months, signaling a potential market adaptation to the sanctions regime. Prior to this rebound, the Russian currency had been on a downward trajectory since August 6, coinciding with the commencement of Ukraine’s incursion into Russia’s Kursk region.
Russian Finance Minister Anton Siluanov explicitly linked the ruble’s weakness to the challenges in energy payments stemming from the US sanctions targeting Gazprombank. He expressed confidence that the currency volatility would subside once a payment solution was implemented. Siluanov’s December 5th statement suggested that within a week, the situation would stabilize as foreign trade participants were actively developing alternative settlement methods with their international counterparts. This optimistic outlook was echoed by analysts and traders who viewed Putin’s decree as a crucial step towards unlocking stalled energy payments, providing a much-needed boost to the Russian currency.
A forex trader from a major Russian bank, speaking anonymously to Reuters, attributed the ruble’s recovery to the release of previously held-up export revenues. These revenues, initially blocked due to the banking sanctions, had entered the market, which was already operating with limited liquidity. President Putin had highlighted earlier in the week that a significant portion of Russia’s foreign trade, up to 90%, was being conducted in rubles and currencies of "friendly" nations, most notably the Chinese yuan. However, the continued need for dollars and euros by some importers sustained domestic demand for these currencies.
Russia’s major sanctioned lenders, including the state-controlled Sberbank, were prohibited from holding or trading dollars and euros due to restrictions on correspondent accounts in the US and Europe, compounded by their exclusion from the SWIFT international banking system. To circumvent these limitations, many Russian banks had resorted to importing substantial amounts of physical dollar and euro cash from third countries throughout 2023. This measure aimed to ensure they could meet client demands for foreign currency. While these larger banks faced restrictions, other institutions, like the local subsidiaries of Austria’s Raiffeisen, Hungary’s OTP, and Italy’s UniCredit, remained unsanctioned and retained access to SWIFT, thereby playing a vital role in Russia’s dollar and euro market. This market had transitioned to an entirely over-the-counter operation following sanctions imposed on the Moscow Stock Exchange in June, leading to the yuan becoming the most actively traded foreign currency in Russia.
Sberbank CEO German Gref assessed the ruble’s fair value to be within the range of 100-105 against the US dollar. He expressed confidence in the currency’s stability, anticipating no further unexpected exchange rate fluctuations in the near term. Gref affirmed that Sberbank currently foresaw no further significant weakening of the ruble, attributing its stability to the improved payment mechanisms and the ongoing adaptation of the Russian financial system to the prevailing sanctions environment. The market’s response to Putin’s decree indicated a return of confidence in the ruble’s near-term prospects.
