Russia’s currency, the ruble (rouble), has lost some 20% of its value in the last two days, on Monday and Tuesday. Following a 6.5% interest rate hike, to 17%, in a desperate move by the Central Bank late Monday evening to halt the ruble’s fall after it lost some 10% of its value earlier in the day, the currency continued its slide on Tuesday in a wild day of trading.
The collapse of the ruble appears to be primarily the result of two factors: (1)the precipitous drop in the price of oil to less than $60/barrel, and (2)the economic sanctions imposed by the U.S., the EU, and other countries following Zrussia’s invasion and “annexation” of the Crimea in February and March, and its “stealth war” and then transparent military intervention in Donetsk and Luhansk provinces in the eastern Ukraine, beginnging in April if not before.
The Russian invasion accelerated with an invasion of Russian troops and armor in August, and continues up to the present, with Russian forces having effectively taken down the border between rebel-controlled areas in the Donbas region and the Russian Federation.
In any event, the ruble and the economy of Russia are now in very serious trouble.
Ambrose Evans-Pritchard (International Business Editor) “Russia risks Soviet-style collapse as rouble defence fails; ‘What is happening is a nightmare that we could not even have imagined a year ago,’ says Russia’s central bank,” The Telegraph, December 16, 2014 (8:59PM GMT).
Alexander Winning and Vladimir Abramov, “Russian ruble suffers steepest drop in 16 years,” Reuters, December 16, 2014 (5:26pm EST).
Evans-Pritchard summarizes the impact as follows:
The rouble has now fallen 56pc against the dollar over the past year. Russian GDP has shrunk to $1.1 trillion, smaller than the economy of Texas, and half the size of Italy’s. The effect has been to double Russia’s external debt to at least 70pc of GDP, a high-risk level for rating agencies.
The Trenchant Observer