Fri 07 Apr 2023:
On Thursday, the Russian ruble fell to its lowest level since April of last year, following reports that British oil giant Shell may repatriate more than $1 billion from the sanctions-hit country.
On Thursday, the ruble closed at 81.6 per dollar, its lowest level since April 2022.
According to reports, Russian President Vladimir Putin has authorized Shell to sell its $1.21 billion stake in a project in Russia’s Far East. Shell exited Russia following Moscow’s invasion of Ukraine last year.
Since the war began in Ukraine in February 2022, Putin has asked foreign companies to seek permission before selling their Russian assets.
The British oil giant is not the only company to withdraw from Russia, which has been under multiple sanctions after the invasion. These sanctions have effectively cut Russia’s global financial and payment systems access.
According to a Bloomberg report, assets worth 15 to 20 billion dollars have flown out of Russia, putting immense pressure on its economy.
The flight of capital from Russia has hurt the stability of the ruble.
“With liquidity in the currency market low, it leads to increased volatility for the ruble,” Dmitry Polevoy of Moscow’s Locko-Invest told Bloomberg.
Indeed, the ruble has had a volatile journey since the Ukraine war. The Russian currency rose from 78 to over 130 per dollar when Moscow invaded its neighbour.
However, by mid-2022, it recovered to 57 ruble per dollar. This was the best exchange rate in about four years.
The currency volatility, however, does not bode well for the Russian economy. After denying it for several months, Putin admitted that sanctions could impact Russia in the medium term.
“The illegitimate restrictions imposed may indeed have a negative impact on it in the medium term,” the Russian state media quoted him as saying.
According to Russian media reports, sanctions have caused the budget deficit to reach 88% in the first two months of 2023.
A larger budget deficit indicates that Moscow requires assistance in funding its coffers.
Russia earned $11.6 billion from oil exports in February 2023, down 42% from $20 billion in February 2022, according to the International Energy Agency.
The drop in revenue comes after the European Union banned Russian oil and the G7 countries and Australia imposed a price cap.
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