Russia: the ruble crashes

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2014/12/16 • Russia

Article by: Tetyana Yarmoshchuk

The Russian ruble continues to fall. The actions of the Russian Central Bank to increase the key rate up to 17 percent per annum calmed the situation down somewhat. However, according to some experts, this will have a very short-term effect and the Russian currency will continue to fall. 

The Russian Central Bank increased the key rate from 10,5 to 17 percent per annum on December 16. The bank’s statement was published on Monday night.

“From 16 December 2014 the Bank of Russia Board of Directors decided to raise the Bank of Russia key rate to 17.00 percent per annum. This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” says the official statement of the Russian Central Bank published on their website.

Since the beginning of the current year, the Russian Bank had increased the key rate six times – from 5,5 percent in the beginning of January. The latest increase in the key rate occurred last Thursday, December 11, from 9,5 to 10,5 percent per annum.

However, all of the Central Bank’s efforts to stabilize the domestic currency market have not yet brought significant results. On Tuesday, the Euro in Russia decreased to 90 rubles after growing over 100 rubles, the dollar stepped away from its maximum rate of 72,6 rubles at the International Stock Exchange. On Tuesday morning, the Euro rate grew to 100,74 rubles, and the USD grew to 80,1. Earlier, on Monday, the Russian currency fell by 5,22%. The ruble set a record of the biggest single-day drop since 1999.

The “radical measure” of the Central Bank

The head of the State Duma committee for budget and taxes Andrey Makarov considers the Central Bank’s actions justified.

“We need radical measures. The Central Bank decided to approve such measures. This is a very powerful and responsible step, and it is very difficult. In this situation, we have to support the Central Bank, which exhibited courage by making such a decision,” Makarov stated.

Many are skeptical about the Central Bank’s initiative to increase key rates.

“So far, I cannot see coherent and effective measures the Central Bank would approve and use to stabilize the ruble rate. We think that the Central Bank has real tools to put everything in order, but it neglects to use them,” says State Duma member, head of Fair Russia party Sergey Mironov. 

Nemtsov: the dollar and the euro rates are Putin’s sentence 

Former Vice Prime Minister of the Russian government, currently member of the Yaroslavl regional Duma Boris Nemtsov criticizes the Central Bank’s decision.

“The nighttime increase of the key rates by the Central Bank up to 17 percent are a reaction to black Monday and the crash of the ruble. The reason of the crash is well-known: the Central Bank turned on the printing machine to help the Sechin-Putin business and gave 625 billion freshly printed rubles to Rosneft. The money immediately ended up on the currency market and knocked down the exchange rate. The market is slightly calmer now, but not for long,” Nemtsov wrote on his Facebook page.

“Today’s dollar and Euro exchange rate are a death sentence to putinism. The supporters of the war against Ukraine have to admit that by supporting a paranoid, lying criminal they sped up the crash of Russia’s economy and financial system,” Boris Nemtsov added.

Former Russian Minister for Finance Alexey Kudrin thinks the Central Bank of Russia did right. However, he notes that the main problem now is that the market does not trust the government.

“The decision of the Central Bank to increase the rate to 17 percent is forced given the circumstances, but it is correct. This measure should be followed by the government’s decision to increase the investors’ trust in the Russian economy,” Kudrin wrote on his Twitter page.

Head of the Central Bank: Russians should learn to live in the ruble zone

Head of the Russian Central Bank Elvira Nabibullina explains the reasons of the fall of the ruble exchange rate with the decrease in oil prices and the fact that Russian companies and banks are no longer able to take out loans from outside the country.

“We really should learn to live in the ruble zone, rely on our own sources of financing, prepare projects in ruble ratios and give import replacement a chance. This is very important. In order for the niches that are freeing up due to the expensive imported goods, to be occupied by Russian producers who are able to produces competitive and affordable Russian goods,” Nabibullina emphasizes.

In the beginning of the year, one dollar cost 32,5 rubles.

Translated by: Mariya Shcherbinina
Source: Radio Liberty

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  • Dirk Smith

    K-A-R-M-A. Adios katsaps.

  • Milton Devonair

    Nothing to eat but vodka and radiator fluid for you russian apes.

    • Don Casavant

      I think that they enjoy the radiator fluid more, it tastes better than their Vodka!

      • Milton Devonair

        But doesn’t the small cranial cavity of the russians alway get caught in the fan blade? Or has some humans told them to turn off the engine before s*cking out the radiator fluid…….

  • Paul P. Valtos

    Well rthe average Russian will suffer. Moscow has never been able to shift from military hardware and vodka to consumer goods. What makes America great is it is a consumer economy despite much comes from China but high quality cars, trucks, locomotives, generators, food, building materials and everything pretty much necessary for consumers is right here.We make products here to be consumed here. You can’t drive tanks down turnpikes because the fuel gets expensive.

  • Michel Cloarec

    It seems that they have problems ! My heart is bleeding (ironical joke) I don´tknow if I am waiting for new year´s eve to fire fireworks !
    Moster Nabubilina has right ! Ruble zone is the answer, Good bye russia, see you on 50 years ! By the way get ride of that putin and his money machine !

  • Don Casavant

    The ruble is not dead yet. Today The Russian government asked several of the companies that take in a lot of foreign currency to use that money to buy rubles! What could they say? They can’t say no or their companies will be confiscated by the Russian government as they serve lengthy terms in prison for “tax evasion” ! I am sure that if this keeps up there will be a riot of the “inner circle”. Just think of the PR problem ole Vlad has with his customary 4 hour speech tomorrow. Who will he fire and put the blame to? Heads will roll but it won’t be ole Vlad’s! That is the Russian way. The average Joe in Russia still believes ole Vlad is working hard for them…there are advantages to controlling all media in your country!

    • Brent

      You’re right It’s not dead. Still very useful!!!