Ruble strengthens, given instantiation of sanctions against Russia

By Vestnik Kavkaza

Yesterday it appeared that American sanctions against Russia for the events over Ukraine and Crimea will touch on representatives of Russian defense industry. It is planned to block property of enterprises and people who deal with arms and military equipment in Russia. People included in the list will be forbidden to enter the USA. The precise list will be defined by the Financial Minister of the USA. At the moment the Speaker of the Council of the Federation Valentina Matvienko, the vice-premier Dmitry Rogozin, the presidential assistant Vladislav Surkov, the advisor of the head of the state Sergei Glaziyev, MPs of the Satet Duma Yelena Mizulina and Leonid Slutsky, and a senator Andrei Klishas are included on the black list. The ruble strengthens against the situation. However, in general its exchange rate remains low.

Vladimir Kievskiy, Executive Vice President of the "Association of Russian Banks", recalls that the national currency is certainly largely determined by factors and technologies which define the functioning of this currency by an institutional body such as the Bank of Russia. “But not everything is determined by the Bank of Russia, and the national economy today, our Russian currency, is not characterized by dynamic growth. Moreover, the danger of a shift of the national economy towards recession has not yet been eliminated and is largely determined by the quality of our national currency. The issue of the partial devaluation of the ruble is also connected with the federal budget deficit, which allows to a certain extent and will allow until something like 2020 to solve urgent socially-important issues. They cannot be solved without a depreciation of the ruble. Playing on the difference in rates allows us to boost the state budget.”

With regard to external factors, according to Kievskiy, they turn certain fluctuations of the ruble downside. “Any phenomenon should be considered in a concrete historical setting, that is, as part of today. Today we have an aggravation of certain relationships associated with well-known events in Ukraine and a number of other issues. Of course, they do not contribute to the sustainable dynamic development of our national currency. This determines the overall situation with the rate of our ruble.”

Speaking about prospects of the ruble, Kievskiy noted: “A series of measures to stabilize the currency will be carried out in the medium-term perspective. They will be carried out sometimes one after another, sometimes in view of events in the country and abroad. But in general I believe that the Russian national currency is going to become stable. The lag is a month, a month and a half, two months, half a year during which issues related to the stability of the national currency will be resolved. With regard to inflation targeting by the Central Bank, the Central Bank's refusal to implement the system of currency intervention has played a role in the decline of the ruble, but the Central Bank has not declined entirely to intervene in currency affairs. At certain times, depending on internal and external factors, the CB is active on the market in terms of currency intervention.”