Last week the Russian ruble hit a seven-year high against the U.S. dollar and while analysts have downplayed the rise, one economist said people should not “ignore the exchange rate.” American economists have been perplexed about the ruble’s market performance and Russian officials have been quoted as saying that a strong ruble “makes Russian exports more expensive.” Furthermore, U.S. president Joe Biden continues to blame high gas prices on Vladimir Putin.
Vladimir Putin Says the West’s Sanctions Obviously ‘Did Not Succeed’
Against the U.S. dollar, the Russian ruble has been performing at the strongest level since May 2015 and it has been said by a number of people that Western sanctions have failed. At the annual St. Petersburg International Economic Forum, Russian president Vladimir Putin said attempts to destroy the Russian economy did not come to fruition. “The idea was clear: crush the Russian economy violently,” Putin declared. “They did not succeed. Obviously, that didn’t happen.” Traditionally, when a country is sanctioned broadly by a majority of countries, capital leaves the region and the currency’s overall value against other fiat currencies would decline.
However, Russia is the second-largest exporter of oil and commands the top position as the world’s biggest gas exporter as well. America and the European Union (EU) are trying awfully hard to sanction Russia but the EU is forced to purchase gas and oil from the country in not-so-obvious ways. Fortune India claims that India is ostensibly buying oil from the Russian Federation and selling it back to the EU for a profit. The New York Post details that analysts believe the ruble’s strong performance is due to the Kremlin’s capital controls and the fact that oil and gas prices have skyrocketed worldwide. In addition to India, China and South Korea have been purchasing oil from Russia.
A study published by Bloomberg Economics estimates that Putin could amass roughly $321 billion in profits from energy exports alone. Tatiana Orlova, a lead emerging markets economist at Oxford Economics told CBS, however, that Russia’s import markets are crumbling at the seams. “Apart from soaring export revenues, we have a collapse in Russian imports owing to Western sanctions,” Orlova noted during an interview with CBS Money Watch. Max Hess, a fellow at the Foreign Policy Research Institute, told CNBC that Russia is still earning record profits. Hess said:
That exchange rate you see for the ruble is there because Russia is earning record current account surpluses in foreign exchange. Although Russia may be selling slightly less to the West right now, as the West moves to cutting off [reliance on Russia], they are still selling a ton at all-time high oil and gas prices. So this is bringing in a big current account surplus.
Service Providers Refuse to Update ATMs in Russia, Biden Says Americans Will Have to Pay High Gas Prices ‘as Long as It Takes’ to Stop Putin’s Ukraine Invasion
Meanwhile, the U.S. and various Western corporations are doing everything they can to stifle the Russian economy. Just recently, the country’s central bank introduced the new 100-ruble banknote but automated teller machines (ATMs) are having issues with the new bill. Western sanctions have pushed ATM companies like NCR and Diebold Nixdorf to exit Russia. Allegedly, ATM service providers are refusing to update the ATMs and the machines reject the new banknotes. According to an unnamed source from the payments industry, Russian ATMs are not a priority. “Given the geopolitical situation, it is difficult to imagine that development for the Russian market will be a priority,” the source familiar with the matter explained.
On June 30, American president Joe Biden was asked at a NATO summit press conference how long American drivers will have to pay high gas prices at the pump. Biden said that it will take “as long as it takes” to stop Putin’s Ukraine invasion. “As long as it takes, so Russia cannot, in fact, defeat Ukraine and move beyond Ukraine,” Biden told the reporter. A Fortune report explains that American citizens “don’t seem to be on board” with Biden’s decisions. The report cites the latest Associated Press-NORC Center for Public Affairs Research poll which shows a lack of confidence in Biden’s leadership.
In terms of handling the U.S. economy, 70% of Americans, including 43% of Democrats, do not approve of Biden’s management. 60% of Americans do not approve of Biden’s leadership, 80% of U.S. citizens think America’s “economic conditions [are] poor,” and 67% of the 80% identified as Democrats. Biden and his administration, however, wholeheartedly believe that Putin is to blame for the world’s rising gas prices. “We could have turned a blind eye to Putin’s barbaric war against Ukraine and the price of gas wouldn’t have spiked the way it has, but America rose to the moment,” Biden said on June 27.
What do you think about the strength of the Russian ruble and Biden saying that Americans must put up with high gas prices because of Putin’s war? Let us know what you think about this subject in the comments section below.