The Ruble and The Realpolitik
Until the invasion, Russian banks and economy were fully integrated into the Western system. Amid a storm of moral opprobrium and a host of international sanctions, the Russian ruble dropped to its lowest point since the financial crisis they endured in 1998. “The ruble has been reduced to ‘rubble’,” Joe Biden lauded. Not so fast, in response the Russians said “okay, if you want our natural gas, Europe, you’re going to have to pay us in rubles.” Before you buy gas in rubles, you have to exchange your euros for them. That and the rate increase have boosted the ruble back to pre-invasion levels. “What’s become clear is that despite an incredibly wide-ranging package of sanctions on the Russian government and its oligarchs, and an exodus of foreign businesses,” Bloomberg reports, “the actions are largely toothless if foreigners keep guzzling Russian oil and natural gas — supporting the ruble by stocking Putin’s coffers.” Germany for example sends €2.6 billion a month to Russia for oil and gas imports. Much of those energy supplies still flow through the Ukraine. Many of the Ukrainian oligarchs still have a vested interest in letting the supplies flow. Will the ruble rebound set Russia up for success in the “long-term,” as our Australian correspondent asks.