Currency poker: why is a cheap ruble beneficial for the authorities? What will happen if the ruble weakens: which industries will profit from this? The continued depreciation of the Russian ruble is beneficial

The fall in the ruble exchange rate brings a lot of troubles - imports become more expensive, foreign holidays become unavailable. However, a number of Russian industries, thanks to the rise in the dollar exchange rate, received 700 billion rubles in additional income, emphasizes Assistant to the President of the Russian Federation Andrei Belousov. Who benefits from the fall in the Russian currency?

The devaluation of the ruble amid the intensification of the sanctions war against Russia by the United States is unpleasant for ordinary citizens. Imported goods and holidays abroad are becoming more expensive, wages do not have time to grow following the fall of the Russian currency. However, for many, the depreciation of the ruble by 20% - from 57 to 69 rubles per dollar - this year is becoming an extremely profitable event.

Additional income for a number of industries from raw material exports due to the weakening of the ruble is estimated at 700 billion rubles, said Assistant to the President of the Russian Federation Andrei Belousov. “An increase of 10 rubles per dollar, which we received during the year, and today our exchange rate, as you know, is in the region of 60, 67, 68 rubles, so this is the increase in relation to the volume of raw materials exports of last year without the participation of oil , gas and coal and, naturally, mechanical engineering, metallurgy, additional revenue of 700 billion rubles,” Belousov said following a meeting with business. Belousov, however, hopes that the business will not use all this excess income as dividends, but will invest it in real development.

First of all, the Russian budget benefits from a weak ruble, and from the combination of expensive oil and a cheap ruble it receives a double bonus. The fact is that budget expenses are based on a lower oil price ($50) and a higher ruble exchange rate (61.5 rubles). In reality, oil is trading around $78 per barrel, and the dollar is close to 68–70 rubles. “The Russian budget for 2018 sets a base price of 3.5 thousand rubles per barrel. Now the Russian budget receives 5 thousand for each barrel,” says Tamara Kasyanova, first vice-president of the Russian Club of Financial Directors. Moreover, the ruble price of a barrel of oil for the first time in history exceeded five thousand, having increased by a third since the beginning of the year.

Therefore, it is not surprising that the Russian budget is in surplus. Moreover, initially it was made up with a deficit of 1.3% of GDP, but by the summer it became clear that there would be a surplus of at least 0.5% of GDP, and most likely even more.

It is interesting that not only Russia, but all developing markets faced currency devaluation. The Turkish lira, the Argentine peso, the Brazilian real, and the South African rand weakened against the dollar. And the Chinese yuan has gone down, however, this currency stands apart because its exchange rate is determined by the People's Bank of China. In such a situation, in fact, any of these countries could become a new source of crisis. Russia, on the other hand, looks very good against the general background, because high oil prices coupled with devaluation allow both the budget and the current account to remain in surplus. Not to mention the fact that Russia has a low public debt and has accumulated solid gold and foreign exchange reserves.

Russian industry also receives a huge bonus thanks to the weak ruble. Export products are becoming more competitive in price on foreign markets, which leads to an increase in export volumes, especially in ruble terms. Past years have already proven the benefits for the Russian economy from devaluation coupled with sanctions. Moreover, not only raw materials, but also non-raw materials exports grew – by 19% in 2017. Sanctions, on the one hand, reduced trade turnover between Russia and the West, but on the other hand, they gave impetus to the production of new types of industrial products within our country.

“To the greatest extent, in the long term, a weak ruble is beneficial to industries aimed at exporting, but not heavily dependent on the import of components or fixed assets. These are those industries in which Russian technological developments are not inferior or slightly inferior to foreign ones and thus minimize dependence on the purchase of equipment or components for foreign currency,” says Deputy Director of the ACRA Research and Forecasting Group Zhannur Ashigali.

Because a weak ruble can interfere with the implementation of investment programs that involve the purchase of imported equipment, notes Anastasia Sosnova from Freedom Finance Investment Company.

For those who spend little on imported raw materials and export products, the current situation is a real paradise. For example, for manufacturers of plastic, wood and rubber products.

In general, not only the oil industry and Gazprom benefit, but also the metallurgical and chemical industries (the cost is in rubles, but the products are sold for foreign currency). Growth drivers are also agro-industrial enterprises, especially grain exporters. The latter may harvest less this year due to the weather, but still earn more profit.

“To minimize currency risks, the largest representatives of these industries prefer to attract debt denominated in the currency of the proceeds. Thus, with the devaluation of the ruble, the cost in foreign currency equivalent becomes lower and the so-called excess income is formed,” explains Mikhail Tkach, leading analyst for corporate ratings at Expert RA.

This year, world prices for products from primary industries are at a level that is comfortable for producers, so the devaluation of the ruble is not a lifeline, but rather an additional guarantee of stability, Tkach says.

However, will a weak ruble lead to explosive growth in industry, which has recently been stagnating rather than growing?

In the short term, the devaluation of the ruble will definitely give a signal for the growth of Russian industry.

However, further is not a fact. “The basic sectors of Russian industry and economy are heavily dependent on foreign equipment, they need access to foreign exchange funding, and they require cooperation with foreign owners of technological developments. Therefore, in the long term, this growth signal will not become sufficiently predetermining to ensure the progressive development of the industry,” says Zhannur Ashigali.

A too weak ruble begins to bring no longer benefits, but only problems. Authorities and businesses previously argued about what ruble exchange rate would be ideal for the real economy. A year ago, when the ruble fell to 60 rubles, the head of the Ministry of Industry and Trade Denis Manturov said that the real sector needed an exchange rate of 58–62 rubles per dollar. At the same time, the real sector itself dreamed of an exchange rate of no more than 52 rubles, and pharmaceuticals generally needed an exchange rate of 42 rubles, because the share of imports in this industry is too large. “Today the rate is already more than 67, but the results of the industry’s work over the year cannot be called breakthrough. The PMI is now below 50 points, indicating a lack of growth. But at least there is some stability,” says Tamara Kasyanova.

Finally, the domestic tourism industry may also benefit from a weak ruble. Outbound tourism is becoming more expensive for Russians by the same 20% by which the dollar-ruble exchange rate has increased. However, there is a flip side to the coin - the devaluation of the ruble leads to a fall or stagnation in the consumer ability of Russians. And the main thing is that incomes do not fall too much, when travel even within Russia becomes inaccessible for many. “Turkey is now in the lead, Abkhazia is in second place, then Finland, Kazakhstan, Ukraine and China. Citizens also visit European countries; Italy, Spain, etc. show good growth. But the domestic tourism market is also growing well,” says Kasyanova.

According to ATOR, the cheapest package week-long beach tour at the end of August can be purchased in Crimea and Anapa, followed by Greece and Turkey, and Sochi in fifth place.

On the other hand, the devaluation of the ruble makes visiting Russia more attractive for foreign tourists. Already last year, the flow of tourists to Russia exceeded 81 million people, which became a record in the entire history of the Russian Federation. The main volume is, of course, Russians themselves traveling around their country. But there was also an increase in foreign tourists. This year the trend promises to repeat itself, and not only due to the World Cup.

The weakening of the ruble in recent years has led to a strong rise in prices in the country. The population is getting poorer and can afford less and less. However, a weak ruble can still be beneficial. First of all, this is the country’s budget, the Ministry of Finance and exporters, especially those involved in the export of hydrocarbons. Thanks to the reduction in imports, Russian manufacturers also benefit, having the opportunity to develop production and occupy vacated niches in the market. Travel companies offering tours around Russia are also in the black, because... impoverished citizens cannot afford to go on holiday abroad.

The unstable political situation in the world, fueled by Russophobia promoted by the United States and some European countries and accompanied by the constant introduction of new sanctions or announcements of them, leads to a fall in the exchange rate of the ruble and its instability. All this provokes a rise in prices and a fall in incomes of the majority of Russian citizens. However, there are those who benefit from a weak ruble.

Ministry of Finance and Budget

The most important beneficiaries of the fall in the ruble exchange rate are the budget and the Government of the Russian Federation. The weaker the exchange rate, the more money flows into the budget. This is due to two factors:

• the depreciation of the ruble provokes an increase in prices within the country. Consequently, tax revenues of the budget, formed from such large taxes as excise taxes, VAT, etc., will grow;
• With a weak exchange rate, the export of hydrocarbons is increasing, since all prices in the contracts of oil producing companies sending products to other countries are fixed in US dollars. Taxes are paid in national currency, which brings additional funds to the budget.

Of course, not everything is so simple. With rising prices caused by the weakening of the ruble, budget expenses increase slightly, and the demand for some goods that have become more expensive falls and entails a decline in the country's economy. Therefore, this positive effect is short-term and entails negative consequences in the future.

The Ministry of Finance's savings also consist and are formed in dollars, so it also benefits from a weak ruble.

The benefit from hydrocarbon exports in a weak ruble is confirmed by the degree of dependence of the budget on the size of exports.

Figure 1. Dependence of Federal budget revenues on hydrocarbon exports.
Source: stolypin.institute.ru/

Today, the budget is 40% dependent on exports from the oil and gas industry. That's a lot. Accordingly, the budget benefit due to the weakness of the national currency is of great importance for the state.

Important information! Did you know that many countries deliberately carry out devaluation in order to fill the state budget.

Exporters

The benefits of oil and gas producing companies are obvious from the previous paragraph. They make all their export sales in dollars, therefore, they receive much larger sums in rubles, in which they pay expenses and taxes. The same applies to all other exporters. In addition, this allows you to reduce the export price in order to win new market segments.

For example, the Russian company Gazprom today earns 37% more money in rubles for every cubic meter of gas sold to Europe than 5 years ago, despite the fact that prices over these five years have decreased from $380 per thousand cubic meters to $230 per thousand cubic meters. thousand cubic meters.

The weakening of the ruble exchange rate becomes especially beneficial during a period of falling oil prices, since it allows you to level out losses.

An additional bonus for exporters is the growth of their shares, since when the ruble exchange rate falls, investors anticipate rising prices and begin to invest in companies exporting products from Russia.

Investors

Investors also receive a certain benefit from the growth of the dollar, both those who hold funds in foreign currency and those who keep them in rubles:

• holders of funds in foreign currency benefit simply due to the fact that they spent less money on its purchase than they could gain from selling it;
• holders of funds in rubles benefit due to the fact that the Central Bank, with a strong weakening of the exchange rate, increases the key rate, and banks, as a result, increase interest rates on deposits.

Russian manufacturers

Due to the fact that the weak exchange rate of the national currency is beneficial to exporters of products, the opposite effect occurs for importers, which entails a decrease in imports of various types of goods into the country. As a result, Russian manufacturers have a chance to take vacated market shares. For consumers, in some way, this is a minus, because... they lose choice, but for the country as a whole this is a huge plus, because... leads to the development of our own production and economic growth in the future.

However, for manufacturers there is also a negative effect that can reduce the positive impact to zero - the availability of foreign currency loans. Again, rising prices lead to decreased demand, which also results in negative impacts for producers.

Travel companies, hotels

When foreign exchange rates rise, prices for holidays abroad increase significantly. This is felt not only by those citizens who buy vouchers, but also by those who are used to traveling on their own. The price goes up for everything:

• flight or car rental, fuel;
• hotel accommodation;
• nutrition;
• all other expenses.

In this situation, people begin to think about traveling to Russian resorts. Consequently, travel companies offering tours around Russia, hotels, parks, museums and cafes get a chance to offer their services to Russians and thus increase their profits. If they also provide high-quality service, they will be able to win a market segment for the future.

The downside here is that many citizens, with rising inflation, which is provoked by a weak ruble, simply cannot afford to travel even within their own country.

What about people?

Be that as it may, and whoever benefits from a weak ruble, it is clearly not the ordinary population of the country. People only get lower incomes and higher prices. This is confirmed by inflation data for the last five years, in comparison with the weighted average exchange rate.

Important information! The weighted average rate, unlike the arithmetic average, is calculated taking into account the number of days during which each value was valid.

Table 1. Average annual inflation in the Russian Federation.

Beer price

Deutsche Bank has released another review of the behavioral equilibrium exchange rates of 31 currencies. The complex British method by which the “true value” of national currencies is determined is also called “beer”, because the words Behavioral Equilibrium Exchange Rate add up to the foamy abbreviation BEER (“beer” in English). The most undervalued is the recently greatly reduced Turkish lira - according to German experts, it should cost 46.2% more. The same applies to the Colombian peso - it should have risen in price by 22.2%. The third place is occupied by the Russian ruble, for which it is actually worth more. It’s interesting that RBC posted this news in the “Falling Ruble” section, although the ruble has been growing quite rapidly in recent days.

Where did the undervaluation of the ruble come from and what follows from it?

At the time of writing this text, for one dollar (overvalued by 7%) they give 65.57 rubles. Without touching the value of the dollar, we can calculate that a “fair” price would be 55.73 rubles. - the difference, you see, is significant. A holiday abroad would be much cheaper, and imported goods would be more accessible. Thus, a brand new iPhone XS in the minimum configuration could be bought not for 88 thousand, but for a “pathetic” 75 thousand rubles.

At the same time, the country’s authorities are not at all eager to set this fair price. With one hand we, of course, raised the key rate, which affects the credit price of the ruble (the higher the rate, the more expensive it is to borrow rubles, and therefore the more expensive the rubles themselves), but with the other we direct “extra profits” from the sale of natural resources to purchase the so-called hard currency, thereby increasing its value relative to the ruble.

Simple theory

One of the axioms of a market multicurrency economy is that a weak national currency is beneficial to countries with a positive foreign trade balance. Humanly speaking, if you sell a lot and buy little, it makes sense for you to lower your currency relative to the seller's currency. Because you incur expenses in your own monetary units, which are cheap, and you receive profits in other people’s, which are more expensive.

That is why the United States, the largest buyer on the planet, has been threatening China with sanctions since the beginning of the 2000s for attempting to artificially depreciate the yuan. It’s already difficult for Americans to fight the dominance of Chinese goods, and if they become even cheaper (after all, wages in Chinese factories are paid in yuan), many sectors of American industry will become uncompetitive.

A strong, overvalued national currency is beneficial to the buyer country, but only if it does not intend to develop its own production. Among the leaders in overvaluation now are the Czech crown, South Korean won, Thai baht, dollar and Swiss franc. With an expensive currency, you can easily purchase other people’s goods, but at the same time you have high costs for salaries and taxes.

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Trump's policies

Donald Trump, the first true and uncompromising American patriot in the White House since Ronald Reagan, is trying to navigate between the Scylla and Charybdis of exchange rates in a rather cunning way.

On the one hand, it strengthens the dollar by increasing the key rate of the Federal Reserve System (it is formally independent, in fact controlled by several banking clans, but still cannot ignore the strategy of government authorities). He won the election with a rate of 0.25%-0.5%, and less than two years later the rate is 2-2.25%. The previous time the Fed set such high rates (beyond 5%) was in 2006, trying to gently “deflate the bubble” in the real estate market, but the bubble nevertheless burst, splashing its contents all over the planet.

On the other hand, trying to avoid the negative consequences of a strengthening dollar for the American economy, Trump is withdrawing from free trade agreements, that is, duty-free trade, and introducing duties - quite moderate, by the way - on a wide range of goods.

Donald Trump, the first true and uncompromising US patriot in the White House since Ronald Reagan. Photo: www.globallookpress.com

As a result, the United States can buy critically needed goods at low effective prices thanks to a strong dollar, but at the same time makes it difficult to import what is already produced in the United States through a system of tariffs. It’s also a sin for US residents to complain - with American incomes they can travel around the world and feel like kings (although outbound tourism is not particularly popular in the States). Simple and effective, especially if you do not pay attention to the political costs and complications of relations with old partners.

Logic of Russia

How is Russia behaving? It is in a different position - the import of a significant part of goods that compete with domestic ones is actually prohibited in our country not by the duty system (here we comply with the WTO rules that are beneficial to us), but through a food embargo. And a low ruble helps to compete in other areas - say, textiles or engineering. Thanks to him, Russia is rapidly conquering the world wheat market, selling it at prices significantly lower than those that Americans or Canadians can afford.

Another question is that there are a number of industries where the share of Russian goods is negligible and will not grow in the foreseeable future. This is, for example, a significant part of fruits and vegetables (the role of climate), almost all electronics, high-quality cars, a significant part of medicines, medium- and long-haul aircraft. The low ruble makes them significantly more expensive. The same applies to any foreign spending by Russians. But foreign tourists are delighted - remember how easily the representatives of impoverished Latin American countries spent rubles at the World Cup!

But the main beneficiaries of the ruble's weakness are, of course, exporters of raw materials. Not only oil and gas, but also coal, timber, water, precious stones and metals. They pay their salaries in rubles, bear a significant part of other costs in rubles, and the cheaper the ruble, the greater the income of these companies. It is difficult to doubt that it was the lobbyists of the raw materials sector who insisted on solving the problem of preserving excess income through the purchase of foreign currency, that is, depreciation of the ruble.

Photo: Sergej Cash / Shutterstock.com

There is one more nuance. The further the value of a currency is from its real purchasing power, the easier it is to manipulate its price and thereby make a profit. Not a single decision of the Central Bank - be it a change in the key rate or an increase in the volume of foreign currency purchases - is made without prior discussion. And citizens who know the course of this discussion can receive incredible income through literally three or four purchase and sale transactions on the foreign exchange markets.

The longer the undervaluation of the ruble continues, the more such opportunities will be available to insiders of the Central Bank and the Ministry of Finance. And this is, of course, a minus of the current state of the national currency.

For a country with a self-sufficient economy that produces everything it needs for itself and also manages to export (this is called “autarky”), the low exchange rate of the national currency is certainly to its advantage. But even China, which is forced to buy energy, metals, and food products, is not like that, let alone Russia. Of course, if manipulation of the exchange rate led not to super-profits for individual companies and individuals, but to the saturation of the economy with money, to an increase in wages and pensions, one could only welcome the presence of the ruble among the top three undervalued currencies. But now this does not correspond to the interests of ordinary Russians, who are deprived of cheap holidays abroad (our climate is conducive to beach holidays for no more than 4 months a year, and Crimea and Sochi are not rubber), and affordable medicines, and partly access to advanced technologies.

It’s probably not worth pushing the exchange rate to 55 rubles per dollar, but 60 is significantly better for the people than what is happening now.

24 August 2018, 19:56
The fall in the ruble exchange rate brings a lot of troubles - imports become more expensive, foreign holidays become unavailable. However, a number of Russian industries, thanks to the rise in the dollar exchange rate, received 700 billion rubles in additional income, emphasizes Assistant to the President of the Russian Federation Andrei Belousov. Who benefits from the fall in the Russian currency?

The devaluation of the ruble amid the intensification of the sanctions war against Russia by the United States is unpleasant for ordinary citizens. Imported goods and holidays abroad are becoming more expensive, wages do not have time to grow following the fall of the Russian currency. However, for many, the depreciation of the ruble by 20% - from 57 to 69 rubles per dollar - this year is becoming an extremely profitable event.

Additional income for a number of industries from raw material exports due to the weakening of the ruble is estimated at 700 billion rubles, said Assistant to the President of the Russian Federation Andrei Belousov. “An increase of 10 rubles per dollar, which we received during the year, and today our exchange rate, as you know, is in the region of 60, 67, 68 rubles, so this is the increase in relation to the volume of raw materials exports of last year without the participation of oil , gas and coal and, naturally, mechanical engineering, metallurgy, additional revenue of 700 billion rubles,” Belousov said following the meeting with business. Belousov, however, hopes that the business will not use all this excess income as dividends, but will invest it in real development.

First of all, the Russian budget benefits from a weak ruble, and from the combination of expensive oil and a cheap ruble it receives a double bonus. The fact is that budget expenses are based on a lower oil price ($50) and a higher ruble exchange rate (61.5 rubles). In reality, oil is trading around $78 per barrel, and the dollar is close to 68–70 rubles. “The Russian budget for 2018 sets a base price of 3.5 thousand rubles per barrel. Now the Russian budget receives 5 thousand for each barrel,” says Tamara Kasyanova, first vice-president of the Russian Club of Financial Directors. Moreover, the ruble price of a barrel of oil for the first time in history exceeded five thousand, having increased by a third since the beginning of the year.

Therefore, it is not surprising that the Russian budget is in surplus. Moreover, initially it was made up with a deficit of 1.3% of GDP, but by the summer it became clear that there would be a surplus of at least 0.5% of GDP, and most likely even more.

It is interesting that not only Russia, but all developing markets faced currency devaluation. The Turkish lira, the Argentine peso, the Brazilian real, and the South African rand weakened against the dollar. And the Chinese yuan has gone down, however, this currency stands apart because its exchange rate is determined by the People's Bank of China. In such a situation, in fact, any of these countries could become a new source of crisis. Russia, on the other hand, looks very good against the general background, because high oil prices coupled with devaluation allow both the budget and the current account to remain in surplus. Not to mention the fact that Russia has a low public debt and has accumulated solid gold and foreign exchange reserves.

Russian industry also receives a huge bonus thanks to the weak ruble. Export products are becoming more competitive in price on foreign markets, which leads to an increase in export volumes, especially in ruble terms. Past years have already proven the benefits for the Russian economy from devaluation coupled with sanctions. Moreover, not only raw materials, but also non-raw materials exports grew – by 19% in 2017. Sanctions, on the one hand, reduced trade turnover between Russia and the West, but on the other hand, they gave impetus to the production of new types of industrial products within our country.

“To the greatest extent, in the long term, a weak ruble is beneficial to industries aimed at exporting, but not heavily dependent on the import of components or fixed assets. These are those industries in which Russian technological developments are not inferior or slightly inferior to foreign ones and thus minimize dependence on the purchase of equipment or components for foreign currency,” says Deputy Director of the ACRA Research and Forecasting Group Zhannur Ashigali.

Because a weak ruble can interfere with the implementation of investment programs that involve the purchase of imported equipment, notes Anastasia Sosnova from Freedom Finance Investment Company.

For those who spend little on imported raw materials and export products, the current situation is a real paradise. For example, for manufacturers of plastic, wood and rubber products.

In general, not only the oil industry and Gazprom benefit, but also the metallurgical and chemical industries (the cost is in rubles, but the products are sold for foreign currency). Growth drivers are also agro-industrial enterprises, especially grain exporters. The latter may harvest less this year due to the weather, but still earn more profit.

“To minimize currency risks, the largest representatives of these industries prefer to attract debt denominated in the currency of the proceeds. Thus, with the devaluation of the ruble, the cost in foreign currency equivalent becomes lower and the so-called excess income is formed,” explains Mikhail Tkach, leading analyst for corporate ratings at Expert RA.

This year, world prices for products from primary industries are at a level that is comfortable for producers, so the devaluation of the ruble is no longer a lifeline (as it was before), but rather an additional guarantee of stability, says Tkach.

However, will a weak ruble lead to explosive growth in industry, which has recently been stagnating rather than growing?

In the short term, the devaluation of the ruble will definitely give a signal for the growth of Russian industry.

However, further is not a fact. “The basic sectors of Russian industry and economy are heavily dependent on foreign equipment, they need access to foreign exchange funding, and they require cooperation with foreign owners of technological developments. Therefore, in the long term, this growth signal will not become sufficiently predetermining to ensure the progressive development of the industry,” says Zhannur Ashigali.

A too weak ruble begins to bring no longer benefits, but only problems. Authorities and businesses previously argued about what ruble exchange rate would be ideal for the real economy. A year ago, when the ruble fell to 60 rubles, the head of the Ministry of Industry and Trade Denis Manturov said that the real sector needed an exchange rate of 58–62 rubles per dollar. At the same time, the real sector itself dreamed of an exchange rate of no more than 52 rubles, and pharmaceuticals generally needed an exchange rate of 42 rubles, because the share of imports in this industry is too large. “Today the rate is already more than 67, but the results of the industry’s work over the year cannot be called breakthrough. The PMI is now below 50 points, indicating a lack of growth. But at least there is some stability,” says Tamara Kasyanova.

Finally, the domestic tourism industry may also benefit from a weak ruble. Outbound tourism is becoming more expensive for Russians by the same 20% by which the dollar-ruble exchange rate has increased. However, there is a flip side to the coin - the devaluation of the ruble leads to a fall or stagnation in the consumer ability of Russians. And the main thing is that incomes do not fall too much, when travel even within Russia becomes inaccessible for many. “Turkey is now in the lead, Abkhazia is in second place, then Finland, Kazakhstan, Ukraine and China. Citizens also visit European countries; Italy, Spain, etc. show good growth. But the domestic tourism market is also growing well,” says Kasyanova.

According to ATOR, the cheapest package week-long beach tour at the end of August can be purchased in Crimea and Anapa, followed by Greece and Turkey, and Sochi in fifth place.

On the other hand, the devaluation of the ruble makes visiting Russia more attractive for foreign tourists. Already last year, the flow of tourists to Russia exceeded 81 million people, which became a record in the entire history of the Russian Federation. The main volume is, of course, Russians themselves traveling around their country. But there was also an increase in foreign tourists. This year the trend promises to repeat itself, and not only due to the World Cup.

Last Monday gave Russians a new anti-record for the fall of the ruble. For the first time in two and a half years, the euro cost 81.87 rubles, the dollar - 70.5. The next day the situation improved slightly, and the Minister of Economic Development even tried to reassure citizens with a forecast that by the end of the year the dollar would return to 63.9. What happens to the national currency?

Since about April, the exchange rate of the Russian currency has been constantly falling against both the dollar and the euro. Such a spectacular fall was achieved by the combination of two factors - and sanctions had nothing to do with it.

Firstly, almost all developing markets showed a fall in the exchange rates of national currencies in a period similar to the ruble. This was due to the fact that international investors began to flock to the dollar en masse. In addition to Russia, the currencies of Indonesia, Argentina, Brazil, India and, especially, Turkey weakened. Even the euro suffered as a result of fluctuations in world markets, but this currency is so powerful that the changes went almost unnoticed.

Secondly, there is now a serious change in the vector of monetary policy in Russia. Previously, the Central Bank did not intervene in the market, and when the exchange rate fell sharply, it tried to stop this process by selling dollars from reserves. Now the Central Bank, on the contrary, is actively buying them in order to lower the ruble exchange rate. So the current situation with the ruble was created absolutely deliberately in order to increase the budget surplus. Putin's May decrees require money.

Photo: Sefa Karacan / Anadolu Agency / Getty Images

In themselves, these decrees simply help allocate funds between people close to the Kremlin. These people are putting pressure on the Ministry of Finance, demanding to show the sources of the money. And the budget surplus due to the low exchange rate of the ruble became one of these sources. In addition to this, the list includes an increase in taxes, expressed, in particular, in an increase in VAT, and a reduction in social guarantees in the form of an increase in the retirement age.

All this seems to last for a long time, because rates in the American market are rising, and the balance sheet of the Federal Reserve System is deliberately being reduced by the Americans themselves. This means that the amount of money in the market will decrease and investors will get rid of falling currencies. As a result, this can last for months and even years.

Approximately the same time forecast can be given for the new policy of the Central Bank of deliberately weakening the ruble. It would be more difficult to strengthen it, because this would require dollar reserves, which are limited, unlike the ruble. It can be printed endlessly.

There will be no return to fundamental positions (58-61 rubles per 1 dollar): this is simply not beneficial for anyone

There are no signs that the Ministry of Finance and the Central Bank intend to abandon this strategy in the long term, although in the short term the purchase of dollars has ceased. As a result, the market itself began to play against the Russian national currency: many domestic investors who owned positions in rubles began to exit them. And this massive exit worked instead of the Central Bank and the Ministry of Finance, which eventually had to stop in order to prevent catastrophic consequences.

Now the fall, I repeat, has stopped. And, perhaps, somewhere on the sidelines of the two departments a decision will be made to buy some rubles in order to balance the situation. However, there will be no return to fundamental positions (58-61 rubles per 1 dollar): this is simply not beneficial for anyone.

Will the government be able to contain the depreciation of the ruble? Of course yes, because that’s what caused it! But the measures will only affect a sharp collapse, but further decline will occur for a long time. After all, this is beneficial for the budget and for the largest exporters - the most important producers of GDP and taxes in Russia.