The value of the ruble tumbled sharply against the U.S. dollar Wednesday on signs that the latest wave of sanctions by Western countries are beginning to impact Russia’s economy.
Russia’s finance minister, Anton Siluanov, told journalists on Tuesday that the imposition of an oil price cap of $60 per barrel by G-7 economies, plus the European Union and Australia, is squeezing Russia’s export income.
This could widen Russia’s budget deficit beyond the planned 2% of gross domestic product in 2023, Reuters reported. In losses that intensified as U.S. markets opened, the ruble
slumped 3% to $72.45 early Wednesday.
“Is a bigger budget deficit possible? It is possible, if revenues are lower than planned. What are the risks next year? Price risks and restrictions,” Siluanov said in approved comments to reporters.
The sanctions, which took effect on Dec. 5, were imposed in retaliation for Moscow’s withdrawing oil flows to Europe and to limit funding for the Russian military campaign in Ukraine.
The ruble has consequently dropped, losing some of the gains achieved in the summer, when it benefited from higher oil prices
“The ruble will continue to weaken because there’s no fundamental demand [for it],” Vladimir Milov, a Russian opposition politician, was quoted as having told the New York Times on Monday.
Russia’s central bank is likely to drop the U.S. dollar and buy Chinese yuan on the foreign-exchange market in a bid to reduce reliance on Western finances, Reuters recently reported.
This year, yuan-ruble
trading on Moscow’s currency exchange has increased from 1% to between 40% and 45%, while the share of dollar-ruble trades have been slashed in half to 40%.