Authors: Gleb Bryanski and Elena Fabrichnaya
MOSCOW (Reuters) – The Russian ruble rebounded above 100 against the U.S. dollar, hitting 99.50 on Friday, after President Vladimir Putin’s decree opened fresh payment options for European buyers of Russian gas, allowing foreign currency flows to resume.
According to data from over-the-counter banks, the ruble strengthened by 1.5% against the dollar. It also rose by 2.4% to 13.57, rebounding above 14, compared to trading on the Moscow Stock Exchange.
Putin’s decree meant that European buyers of Russian gas, including Hungary and Slovakia, who previously used Gazprombank for their transactions, could now exchange their currency for rubles in other, non-sanctioned banks.
US sanctions imposed on Gazprombank on November 22 disrupted the Russian currency market, causing the ruble to fall 15% against the dollar.
The Russian currency is currently experiencing its best week in four months, suggesting that the market has adjusted to the sanctions. The ruble has been weakening since August 6, the first day of Ukraine’s incursion into the Kursk Oblast in Russia.
Russian Finance Minister Anton Siluanov directly linked problems with energy payments and US sanctions against Gazprombank to the weakness of the ruble, saying that volatility would disappear as soon as a payment solution was found.
“Our foreign trade participants are looking for ways to settle accounts with contractors abroad, so I think one more week and everything will be fine,” Russian media quoted Siluanov on December 5.
Analysts and traders shared this view, saying Putin’s decree unblocked energy payments, which strengthened the Russian currency.
“Previously blocked large export revenues that were stuck due to new banking sanctions were able to be ‘unlocked’ and have now entered a market that is already very tenuous,” a currency trader at a gigantic Russian bank, who declined to be identified, told Reuters, explaining reasons for the escalate in the ruble.
Putin said this week that as much as 90% of Russia’s foreign trade now takes place in rubles and the currencies of “friendly” countries such as the Chinese yuan. However, some importers still needed dollars and euros, creating domestic demand for both currencies.
Russia’s largest sanctioned lenders, including state-controlled Sberbank, can no longer hold or trade dollars in euros because they cannot hold correspondent accounts in the U.S. and Europe and are cut off from the international SWIFT system.
Many Russian banks are importing gigantic amounts of cash in dollars and euros from third countries at least throughout 2023 to serve their customers if they want to purchase foreign currency.
However, many Russian banks, including local subsidiaries of Austria’s Raiffeisen, Hungary’s OTP and Italy’s UniCredit, were not subject to sanctions and were able to exploit SWIFT.
Such banks formed the core of Russia’s dollar and euro market, which became entirely over-the-counter after June sanctions on the Moscow Stock Exchange resulted in the yuan becoming the most traded foreign currency in Russia.
The president of Sberbank, German Gref, said that the fair value of the ruble was in the range of 100-105 per US dollar and added that he did not expect any major unexpected fluctuations in the exchange rate for now.
“We don’t expect any surprises because of this today. This will vary depending on the situation. And currently we see no room for a significant weakening of the ruble,” Gref said during the bank’s investor day.
