The ruble plummeted shortly after Russia invaded Ukraine. But now it is at a record high. But that could paralyze the economy, the Kremlin fears and is going through countermeasures.

The ruble plummeted shortly after the West imposed sanctions on Russia for invading Ukraine. But the crisis in the Russian currency was short-lived, it has been on the road to recovery for months and has now doubled its low or hit a seven-year high. However, this rather unintended effect poses a problem for the leadership in Moscow: Because of the strong currency, companies in the country could invest and produce less. The Kremlin is therefore examining measures to ensure that the ruble does not develop into a risk for its own economy.

Will intervention break ruble strength?

Economics Minister Maxim Reshetnikov said at an economic conference in Moscow that the strong ruble is already having a negative impact on export-oriented industries. Mechanisms to stabilize the course would be examined next week, according to Finance Minister Anton Siluanov. According to Siluanov, Russia is ready to intervene in the foreign exchange market with state revenues – for example from oil and gas transactions. Economy Minister Reshetnikov, on the other hand, doubted that intervention in the foreign exchange market would solve the problem.

Russia’s central bank head, Elvira Nabiullina, also pointed out that artificial intervention in the ruble exchange rate entailed the risk of an excessive devaluation of one’s own currency.

The currency experts cite the high oil price as one of the reasons for the ruble’s strength, as well as drastic restrictions on foreign exchange transactions by the Russian central bank and western sanctions, which primarily affect Russian imports. Due to the Western embargo on high-tech, machinery, armaments and luxury goods, imports have shrunk to less than half. As a result, the need for foreign exchange has also fallen significantly.