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After imposing the sanctions to Russia, 1 USD skyrocketed to 139 Rubles, but now it is back to the pre-war exchange rate. Moreover, it kept decreasing almost every day recently. Does this mean that the Western sanctions on Russia did not work as intended and the Russian economy will not be hurt by them? enter image description here

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  • $\begingroup$ Where is this data sourced from? If I have some rubles, where can I exchange rubles for dollars at this rate? I doubt the Russian government will allow me to exchange rubles for dollars at all. For example I have heard that every citizen was only allowed to exchange $10,000 at the official rate. That means the rate past that point is infinity rubles per dollar. $\endgroup$
    – user253751
    Apr 26 at 14:45
  • $\begingroup$ This data is from just googling "USD to RUB". $\endgroup$ Apr 26 at 17:17
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    $\begingroup$ so where does Google get it? $\endgroup$
    – user253751
    Apr 26 at 17:21
  • $\begingroup$ @user253751 according to Sberbank, Russia's largest bank, it will sell me USD for 80.96RUB, and Euro for 86.08RUB, at the time I'm writing this. This price is only valid online and in the Sberbank app, and there might not be actual cash in the banks. This article (in Russian) claims there aren't any limits on sale of foreign currency, except the banks are only allowed to sell the currency they purchased after April 9. $\endgroup$ Apr 26 at 21:45
  • $\begingroup$ @Gallifreyan yeah I can't really believe it. Everyone would have rushed to exchange their rubles to USD in case of further collapse. $\endgroup$
    – user253751
    Apr 27 at 8:19

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No, it does not mean that. Currency value just reflects supply and demand for the currency. It is not a measure of how economy is performing.

There can sometimes be some correlation between exchange and how economy is doing but exchange rate fluctuations are not good measure of economic performance. If an economy is in a turmoil people might want to move their money out of the country and in that case you can see exchange rate drop being correlated with health of the economy. However, the drop in exchange rate is caused by people purchasing foreign currencies and selling rubles, which can occur even when economy is performing well. Furthermore, Russia has capital controls and consequently there might be some people who want to sell rubles but can't so in this case even economic turmoil might not cause exchange rate to change much.

To see how much economy gets hurt by sanctions we have to look at some real variables like real output or similar measures of economic performance. There are no data on Russia's output, after the sanctions released, yet. These things are typically released by 2-4 quarter lag.

However, economic projections by respectable economic institutes such as the Institute of International Finance forecasts that Russian GDP will contract by about 15%. That is more than Russia contracted as a result of Covid19 pandemic. Hence if these projections come to be true the sanctions will hurt Russian economy considerably.

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    $\begingroup$ Can we believe USB/RUB exchange rates since many people are forbidden from actually exchanging? $\endgroup$
    – user253751
    Apr 26 at 17:21
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    $\begingroup$ you can believe the exchange rate because you can actually transact at it at limited quantities so it’s not arbitrarily fixed like USSR exchange rate that was purely made up. Without the capital controls the exchange rate would be lower. However that’s like asking if you can believe in McDonalnd burger prices in Paris because of VAT or regulation that make final price different from which it would be on free market $\endgroup$
    – 1muflon1
    Apr 26 at 17:43
  • $\begingroup$ @user253751: Many people are forbidden, many others are not. I recall Russia trying to mandate buying its oil in rubbles a few weeks back? The US and EU declined, but that isn't to say India and China might not have acquiesced. $\endgroup$
    – sharur
    Apr 27 at 4:21

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