Russia's Ruble is Global Best Performing Currency in March; 1st Qtr Current Account Surplus Soars to Record High
Russian President Vladimir Putin said defiantly on Monday that Western sanctions have proved to be “ineffective” in meeting their objective. In his words, “They (US and EU) expected these sanctions to rapidly produce a devastating effect on Russia’s finances and economy, sow panic in the markets, bring about a collapse in the banking system and create major shortages of goods in shops.”
“However, we can already say in all confidence that this policy has failed in Russia. The strategy of unleashing an economic blitzkrieg has been ineffective. Moreover, the sanctions affected those who initiated them. I am referring to higher inflation and unemployment and the worsening economic outlook for the United States and European countries, as well as the declining living standards of Europeans and the depreciation of their savings.”
All indications are that the contingency planning that Russia had worked out to pull through a severe sanctions regime is paying off. The ruble’s recovery has been absolutely astounding. The US President Biden had boastfully redacted that he’d turn ruble into “rubble” but the exact opposite happened. In the immediate aftermath of sanctions, the Russian currency plunged to 121.5 ruble per dollar and things looked dire enough. But it has since surged all the way back to where it was before Russia’s special operation in Ukraine began — around 80 ruble per USD in mid-April. Ironically, ruble turned out to be the best performing currency in March!
Putin noted that consumer prices have “grown considerably in Russia over the past six weeks, by 9.4 percent,” and people have “felt the impact on their family incomes.” He announced a decision “to adjust all social benefits, pensions and wages in the public sector, in accordance with inflation.” Russia can afford it, as in the first quarter of this year, “we are witnessing a record level of budget surplus.”
In comparison, it is a dismal scene in the US with inflation touching a 40-year high — 8.54% for March — that is going to get only worse if the conflict in Ukraine continues. Worse still, this scenario may upset Biden’s green energy plan. As for Germany, the largest EU economy, this year’s inflation is expected to touch double figures.
Interestingly, Russia is enjoying a “robust trade surplus” and in the first quarter of the year, current account surplus exceeded $58 billion, “setting a historical high. Foreign cash is returning to the banking sector and household deposits are growing.” Indeed, the factors behind the ruble roaring back are self-evident.
It seems the EU has sensed that Russia is putting back together amazingly well the pieces of life in an environment of extreme isolation from the West. The EU foreign policy chief Josep Borrell has admitted publicly that “With regard to financial sanctions, of course, you can always go further, but we have already reached the limits of what we can do. We did everything we could.”