Editorial|Editorial
The Russian economy is slowing down, and the ruble’s exchange rate follows the development.
Vthere are two misconceptions about the current economic development. One is Western and the other Russian. In the West, it is customary to ensure that sanctions against Russia do not affect the Russian economy. In Russia, on the other hand, the notion inherited from the Soviet era flourishes, according to which the value of the currency is always a matter of decision.
More than a quarter of the value of the ruble has disappeared during the year. The development has got Russian decision-makers on their toes. Attempts have been made to keep the war in Ukraine at a distance from Russians’ everyday life – especially from business trips. Sometimes the distancing has gone well, sometimes badly. Ukraine has brought the war to Moscow with drone strikes. The war also absorbs men from different parts of Russia, which cannot be completely concealed. However, the big fear of Russian leaders is that the economy will collapse. It could be the end of the current administration.
Russia is headed for economic collapse. Not as fast as hoped in the West, but the direction is clear. Many strong economic sanctions have been used against Russia, but the strongest seems to be the one that Russia tried to use against the West: energy sanctions.
The West has surprisingly smoothly disengaged from Russian energy. The effectiveness of the oil price ceiling was doubted in the West, and in Russia the solution was considered ridiculous. The assessments were based on the same reasoning: there will be holes in the roof, and China will buy all the oil as before.
Now we can see that Russia’s export earnings are shrinking rapidly. At the same time, the war chest is depleted. The price ceiling is not exceeded even by countries that are not part of the sanctions. The Russian economy is slowing down, and the ruble’s exchange rate follows the development.
Until now, the Russian central bank has been allowed to act surprisingly independently and sensibly. The situation may change, because the country’s decision-makers and other influential people, who are worried about the exchange rate, demand the central bank to make the ruble more valuable. A currency made by deciding to be stronger in a weak economy would know certain destruction. But what are the Russian decision-makers capable of with their jerk reflexes.
The editorials are HS’s positions on a current topic. The articles are prepared by HS’s editorial department, and they reflect the journal principle line.
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