Rumbling the Ruble! By James Reed
Talk about committing economic suicide. With the measures of financially cancelling Russia, all that has happened is that Russia moves outside the drag net of US dollars, and trades in rubles, especially for natural gas. It marks the end of US dollar dominance, as other dissent countries will soon follow the lead, already encouraged by China. But, dismantling the West was always the plan of the New World Order with its oriental focus.
“So what was the world’s best performing currency of the past month?
You guessed it: the Russian ruble. After plunging to 139 rubles to the dollar on March 7, the ruble staged a dramatic comeback to around 80 rubles to the dollar. That’s only slightly weaker than where it was for almost all of last year. The recovery is equally impressive when compared with the euro. At the end of February, it took 89 rubles to buy a euro. In early March, that climbed to around 145 rubles. Now it is down to 87.32.
On Friday, the joke among foreign exchange traders was that the Russian central bank was going to have to cut interest rates to keep the ruble from getting too strong and making its exports too expensive. That’s unlikely, but the point is important: the sanctions on Russia were intended to cripple its currency on the global market in order to weaken Vladimir Putin’s economy. The recovery indicates that the sanctions, even as they have been strengthened both by official measures and private companies renouncing business ties with Russia, are not working as advertised.
The biggest reason for this, of course, is natural gas. Russia began to demand recently that Europe pay for natural gas in rubles instead of euros. So far, only Hungary has announced its intent to comply with this, but it’s far from clear that the rest of Europe will be able to hold out. That would create a demand for rubles, especially from places where most of the saving is in euros. So the euro will fall against the ruble. Since markets are anticipation engines, that has already begun in advance of European capitulation on the currency issue.
Why does Russia want to be paid in rubles? The answer to that is complex. In the first place, the sanctions and private sector actions have cut Russia off from access to many of the things it could use euros (or dollars) for. Western countries froze Russia’s foreign reserve holdings. We cut off Russia’s access to imports from much of the world. Going even further, we made it incredibly difficult to obtain financing to make payments for Russian energy. In other words, we squeezed Russia’s demand for euros and dollars by cutting off uses for dollars and squeezing the supply. Russia had little choice but to move to demand payment in its domestic currency.
Russia is likely to demand ruble payments not only for natural gas sent to Europe but also for oil and food commodities, such as wheat and corn. This will increase global demand for the ruble. In fact, it will strengthen both the hands of Russian financial institutions and, ultimately, Putin’s government. Those buying commodities in rubles will have to turn to Russian banks for financing (as Russian bank loans are the source of rubles) and will seek to export more to Russia to obtain rubles. This will create an alternative to the eurodollar system for countries that either must be–or decide to be–closer to Russia and away from what we’re calling the West again.”
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