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For simplicity, let's take the example of the USD-to-RUB rate. Currently, Russia manages to maintain it at around 60 RUB per USD. However, as far as I understand it, they manage to do it by selling gold, selling oil at a discount (to certain countries), putting restrictions on currency exchange, and maybe other restrictions as well. It seems to me that this cannot continue for a long time. Is it likely that they will sustain the value of the ruble in the long term, or will it explode at some point?

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    $\begingroup$ They can go on selling oil and gas so long as they can find someone to buy it and pay for it and they can manage to maintain production and delivery. So far, this has led to the ruble gaining in value against the dollar compared to 2021. What happens after the conflict in Ukraine ends may depend on how it ends $\endgroup$
    – Henry
    Aug 12, 2022 at 10:07

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The exchange rate depends primarily on trade and financial flows and monetary policy. As long Russia will continue to have huge trade surpluses as it has now (see data) and as long as its monetary policy does not get too loose they can manage to keep strong ruble. Especially given the controls on capital flows (see WSJ) which make it difficult to move money out of Russia.

This being said strong ruble does little good to Russian economy as it hurts its exports and increases demand for imports. Russian central bank pursued very tight monetary policy to strengthen rubble and it seems this was done mainly for prestige, so probably they will eventually pursue more loose policy and let it slowly fall.

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Many of the usual mechanisms that determine exchange rates are not working at the moment. People only buy the ruble if they must, even if ruble interest rates are high.

The ruble is "artificially" strong at the moment because the exchange market is dysfunctional right now. For example, nobody wants to buy Russian debt. The ruble is not really traded freely at the moment. When someone buys rubles it is essentially to buy Russian gas or oil or other commodities on which they depend. The rest of the world still imports energy at high prices, but because of sanctions, values of imports have shrunk much more (so Russia cannot spend their dollars abroad). This imbalance puts artificial upward pressure on the ruble in the current situation and could go on (as Henry in his comment to the question suggests) as long as Russia continues to sell energy to the rest of the world. The currency would likely depreciate if Russia stops selling or its energy export are boycotted. It would also likely depreciate if trade sanctions are lifted because then Russia would spend USD to pay for imports.

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