Dmitry Piskulov: “The Crimea will determine tendencies of the ruble exchange-rate value”

Interview by Daria Melikhova, exclusively to Vestnik Kavkaza

After last Monday's panic, when a dollar cost more than 37 rubles, and more than 52 euros, the Central Bank boosted accumulated investments and increased key interest rates, including at the money market, which led to reduction of the panic. However, the situation is unstable at the exchange market. The chairman of the Board of the National Currency Association, Dmitry Piskulov, thinks that all market players look at the political context. He told Vestnik Kavkaza that the political situation in Russia and Ukraine, especially the Crimea, will determine tendencies of the exchange-rate value.

- How can the situation in Ukraine and Crimea affect the Russian economy and the ruble?

- The impact can be very multifaceted. We have to establish who is going to benefit from these events. Players on the Russian financial market and international investors are very closely observing the situation surrounding the potential conflict between Russia and Ukraine, the situation in Crimea. In this regard 2 scenarios are possible. The first is a negative one. If Russia, despite its diplomatic efforts is drawn into the war, even a short-term war, it would mean that the majority of Western countries will start to impose more severe sanctions which might have a negative effect on the financial markets, that is, the outflow of capital will continue, Russian assets will be abandoned by a number of players. When all foreign players sell their assets and some of the Russian players will continue to sell Russian assets, the ruble might continue to fall.

However, if efforts undertaken by the Russian leadership concerning the situation in Ukraine ultimately lead to a change in international public opinion, if the issue of Crimea, of the referendum and of the possible recognition of the independence of this territory or of the possible ascension of the territory to Russia is resolved in favor of Russia, that is if the main key players - Russia and the United States - agree on this issue, there will be no more tensions on the market. It will certainly lead to an increase in the political influence of Russia, it will be considered a victory for Russia, despite all the political conflicts at international level. That is, it will certainly lead to the strengthening of Russian influence, and the strengthening of the Russian ruble.

- How do oil prices influence the exchange rate of ruble?

- Traditionally, the correlation between ruble exchange rate and oil prices is negative, i.e. the lower oil prices are, the faster the ruble falls, as oil is a significant product of our export. 25% of Russian foreign trade consists of oil exports. Russia sold oil for $86 billion in 2013. However, in recent years we can see a situation, when oil prices are high, but it doesn’t influence the exchange market of Russia in a large extent, as it used to be. This is a positive tendency. Oil prices may slightly grow, it is stable. It means stable inflow of foreign currency to the country, but other factors pressure on ruble.

The ruble is falling because of outflow of capital. We have inflow of foreign currency and capital due to currency earnings. At the same time, there is big outflow of capital, as the economic growth rate had dropped to 1%. So the oil price had little impact on the ruble price. However, if we see a dramatic fall of oil prices at international markets, which is unlikely, it will be a negative factor for the Russian ruble, as 25% of Russian earnings are due to oil.