Almost three years after the war in Ukraine began, the conflict has entered a new phase, with a new set of sanctions by the United States on 50 Russian banks. If this movement fulfills its purpose, it will force the European Union to stop buying Russian gas on the market, and this was one of the main sources that Russia had to keep its currency, the ruble, afloat. Therefore, once the sanctions have been announced, The Russian currency has sunk in the market to levels not seen since the start of the war: The currency has sunk to 113 rubles per dollar, triggering intervention by Russia’s central bank to try to support its price.
On November 21, the United States announced a new wave of sanctions, which included 50 Russian banks, including Gazprombank. The latter has been a key piece since the war in Ukraine began for Russia to obtain foreign currencies, since it was the key institution to channel the euros with which the European Union paid for Russian gas.
The sanction represents a new obstacle for Russia to receive euros, and the markets have realized it. The price of the ruble has sunk this Wednesday, once it has begun to be discounted that Russia will not have foreign currencies to be able to support its own. The movement has been one of the most aggressive in memory in a single market day, with a decrease of more than 15% on the daywhich has led the Russian currency to touch 113 rubles per dollar, the lowest price seen since March 2022, shortly after the start of the war.
The reasons for US sanctions
What is happening in recent weeks in the West’s relationship with Russia seems to be related to the possibility that negotiations to end the war are just around the corner. Donald Trump’s victory in the US presidential election earlier this month is a key factor in the equation, as the new US president has made public his intentions to end the conflict as soon as possible.
The two parties, the Western bloc and Russia, seem destined to sit at the negotiating table in the coming months, and this is increasing the rush to gain a strong position in the face of peace talks. If Russia, for example, is choked by its inability to take Kursk, or is suffering economically from new sanctions, it may accept more favorable terms, and vice versa on the Ukrainian side.
This may have to do with the United States’ decision to sanction Gazprombank, and leave the European Union in a situation of energy vulnerability, no longer being able to receive Russian gas, although it has been importing it through the bank for almost 3 years of war. Russian. Gazprombank was key to receiving the euros, and exchanging them for rubles, which was a source of stability for the Russian currency. Now that it will no longer have access to the European currency, the market has panicked with the ruble, and its price is suffering.
The United States also has an additional interest with its sanctions: Russian gas could be replaced by American liquefied natural gas, after the American country has increased its production of the energy raw material in recent years, and has increased its exports of the same to the European continent. In fact, Ursula Von Der Leyen, the European commissioner, has already declared that American gas can replace Russian gas, after having a telephone conversation with Donald Trump.
Russian central bank takes action on decision
In mid-October, when the ruble was sinking and approaching 100 rubles per dollar, Russia’s central bank said it was not worried about drops in the currency, even though they could end up fueling inflation. The central bank is currently trying to reduce an inflation rate of more than 8%, but it seems that it will have to put this attempt on hold, at least until the currency stabilizes.
The central bank, according to sources Bloomberg Knowing their intentions, they had no problem seeing the ruble above 100 rubles per dollar, but this Wednesday’s movement, which has taken it to 113 rubles per dollar, already seems excessive in the eyes of the lords of the money: the central bank has just announced that it will stop buying foreign currencies in the domestic marketat least until the end of the year, with the aim of reducing volatility in the markets.
This decision is likely aimed at supporting the ruble or at least not contributing further to its declines, as the central bank’s purchases of foreign currencies are additional downward pressure on the local currency.
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