Bloomberg: There’s Split Of Elites In Russia
- 19.08.2023, 8:26
Warring factions blame each other for the fall of the ruble.
Russia's economy is in such disarray that the country's top officials have begun publicly confronting each other. The controversy came as the ruble fell, which is down about 20% against the US dollar this year, Bloomberg reported.
According to Business Insider, the collapse of the ruble prompted Maxim Oreshkin, chief economic adviser to the president of the aggressor country Vladimir Putin, to lash out at the Russian Central Bank. “A weak ruble complicates the restructuring of the economy and negatively affects the real incomes of the population. A strong ruble is in the interests of the Russian economy,” Oreshkin wrote.
A day later, Russia's Central Bank raised interest rates 3.5 basis points to 12% in an emergency meeting in an attempt to support the ruble. Head of the Russian Central Bank Elvira Nabiullina said that the fall in the ruble was due to changes in trade flows in Russia amid large-scale sanctions. At the same time, oil and gas revenues halved in the first half of the year.
“Now in Russia there is a tug-of-war between the military ambitions of President Putin on the one hand, and the political goals of the central bank and the Treasury on the other,” says Liam Peach, an economist at research firm Capital Economics.
Why has the ruble weakened?
As Bloomberg analysts noted, there are several reasons for the weakening of the ruble, in particular:
a significant deterioration in the terms of foreign trade;
international sanctions, which, in fact, led to the fall of the ruble.
Thus, experts say, the income of large Russian exporters in July 2023 decreased to $6.9 billion — from $16.8 billion in the same period last year, which hit the Russian economy very hard, because these funds are a key source of hard currency for Russia.
The fall of the ruble is also affected by the outflow of capital:
households transferred about $40 billion to foreign banks — as interest rates in rubles fell short of inflationary expectations, and “an increasing number of Russian banks found themselves cut off from global payment systems”;
deposits of Russians in foreign banks increased in June 2023 by $66 billion.
One of the worst currencies
The ruble has already weakened by 23% against the dollar in 2023 and remains in the top 3 worst-performing emerging market currencies. It is accompanied by:
Turkish lira;
Argentine peso.
Analysts say the situation will only get worse in the future. After all, there are no reasons to improve the position of the ruble soon.