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Despite sanctions from the West, Russian ruble continues to gain

Russia's economy is down but now battered

The Russian ruble has bounced back after a sharp fall in March. At present it is trading around 70 to a US dollar—the highest in over 20 months. The ruble plunged to an all-time low of about 150 to a US dollar in March just after Moscow’s invasion of Ukraine.  

Not only has the Russian Central Bank pegged the currency with gold, the country’s President Vladimir Putin signed an agreement under which foreign buyers are required to pay ruble for gas purchase. Any currency backed by gold is perceived to be stabler and stronger.

That apart, Russia also announced cutting off gas exports to Poland and Bulgaria after they refused to pay in ruble. While these countries are looking for alternative gas supplies, the choking of Russian gas could impact the lives of their citizens in the near term.

More than a third of Europe’s energy requirements are sourced from Russia and the country’s energy major Gazprom in fact enjoys a monopoly on pipeline supplies. Aided by high energy prices, the company’s net profits soared to 2.09 trillion rubles in 2021, up from 135 billion rubles in 2020.

Despite stringent sanctions thrashed out on Russia after its Ukraine invasion, the Russian economy has not collapsed even as most analysts predict a massive contraction in 2022.

“The fundamentals in the Russian economy are still strong with huge foreign exchange and gold reserves..we continue to have a strong position in the global market, especially in the energy sector,” senior Russian journalist Anna Koroleva told India Narrative. “If Russia turns off Europe's gas, they will not like it very much,” she said.

Earlier, India Narrative reported that with 11 per cent of global oil reserves, sanctions against Russia will have limited impact. Russia also accounts for 21 per cent of gas production in the world and is one of the largest exporters of wheat.

According to news platform Foreign Policy (FP), Russian energy supply has only increased. The country’s oil exports to Europe besides other countries including India have gone up.

Russia is also Beijing’s third-largest gas supplier. Ties between the two countries have also been deepening.

“Putin in continuing to make at least a billion dollars a day by selling oil and gas, and the lion’s share is from Europe,” FP quoted former Europe specialist at the State Department, Edward Fishman as saying.  

Also read:Will sanctions really cripple the Russian economy?

Record inflation hits EU countries as sanctions against Russia kick in