1 USD was about 75 Russian Rubles before the war in Ukraine began. After the sanctions, Russian Ruble quickly declined and 1 USD skyrocketed to 139 Rubles. Now it is back to around 85. What are the reasons for it? As the West is proposing more and more sanctions, shouldn't it be declining even more? enter image description here

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    $\begingroup$ Probably because the sanctions being imposed don't add up to pennies on the dollar and that the loss was largely due to weak hand investors selling at a loss to people smarter than they are $\endgroup$
    – Richard
    Apr 6, 2022 at 18:20

1 Answer 1


It’s likely combination of several factors.

  1. Some of it it’s because Russia has instituted capital controls (see Reuters). That means that Russians are limited or in some cases even prevented from exchanging rubles for other currencies. Exchange rates are ultimately determined by supply and demand. If people are not allowed to supply rubbles to the market, ruble supply shifts to the left and that, ceteris paribus, causes exchange rate to appreciate.

  2. Russian central bank increased interest rates to 20% (see the economist) that strengthens the ruble.

  3. Exchange rate often overshoots (see Dornbusch 1976). The initial depreciation in ruble likely did not just reflect fundamentals.

  4. Some of it is also because Russia recently started using Gazprombank to partially evade sanctions on Russian central bank (see my answer here about that). Russia essentially requires other countries to pay for energy exports there and Gazprombank then converts the foreign currency to rubles, since it is not sanctioned.

  5. It’s partially also because while the sanctions for sure hurt Russia they do not hurt much Russian energy exports. EU imports 26.9% of oil, 41.1% of gas and 46.7% of coal from Russia (see Eurostat). These important energy imports are not yet sanctioned and realistically there is no way how EU could manage to get some substitutes for that in near term. As long as Russia can continue its energy exports and as long as exports will be greater than imports (with which the sanctions help actually) Russia will be accumulating current account surplus which will help prop up the ruble.

  • $\begingroup$ So, the sanctions actually do hurt Russian economy but it may or may not be apparent on the ruble, correct? $\endgroup$ Apr 6, 2022 at 11:21
  • $\begingroup$ +1 though there may be more factors: the Russian government is requiring Russian exporters to change dollars in rubles when they might previously have held in dollars, so pushing up demand for rubles; and (developing point 5) sanctions are restricting what goods and services can be imported into Russia and crushing Russian domestic investment so reducing demand for foreign currencies $\endgroup$
    – Henry
    Apr 6, 2022 at 11:42
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    $\begingroup$ @ArchilZhvania yep of course they hurt Russian economy you can see that from their GDP projections. Generally speaking most trade restrictions hurt economy trade is almost always good for a country. The biggest downside is it creates interdependence like EU with Russian gas and Russia with cutting edge electronics. Exchange rate is not really good indicator of how economy is doing because A) it’s relative to other current there is no absolute exchange rate B) exchange rate depends on price level, interest rates and trade flows between countries plus some speculation due to uncertainty $\endgroup$
    – 1muflon1
    Apr 6, 2022 at 11:52

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