US Ambassador: Nabiullina has done a 'great job' to temporarily strengthen the ruble The central bank has been able to effectively strengthen the Russian ruble, but it remains to be seen what happens to the economy due to sanctions, according to US Ambassador John Sullivan. According to him, the head of the Central Bank, Nabiullina, is a talented person. The US Ambassador called Nabiullina's excellent work on strengthening the ruble” />
The head of the Central Bank of Russia, Elvira Nabiullina, did a “great job” to strengthen the ruble, according to US Ambassador to Russia John Sullivan, but over time, the impact of sanctions on the Russian economy will grow. They stated this in an interview with TASS.
“The Chairman of the Central Bank [Elvira Nabiullina] is an exceptionally talented person, she did an excellent job of temporarily strengthening the ruble— maybe even excessive. The ruble rose. But I think that the impact of sanctions and export controls will increase significantly over time, — Sullivan said when asked if he thought sanctions against Russia were effective.
The US ambassador added that if he were Russian citizens, he would be worried about how the sanctions affected the Russian economy. «Their influence on the Russian economy— influence, which I believe will be significant, — he said. It took decades to build trade relations between the United States and Russia as they were before the sanctions, he said, and “it will take years” to restore them. “This is on the condition that people themselves want it, until they leave, that is, while we don’t even think about it,” — Sullivan noted.
The ruble, which had been seriously shaken by the imposition of Western sanctions due to Russia's special military operation in Ukraine, strengthened against the dollar and the euro in April after the Bank of Russia imposed foreign exchange restrictions, as well as on against the backdrop of an excess of exports over reduced imports.
After reaching the bottom point in March at 126 rubles. per dollar and 135 rubles. for the euro, the ruble fully won back the fall, reaching by May 20 the minimum level for four years— 58 rub. per dollar. Following the growth of the ruble in Russia, inflation began to decline. According to the latest data from Rosstat, for the week from May 7 to May 13, prices increased by 0.05%— this is 44 times less than in the first week of the sanctions.
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The inflow of oil and gas revenues in foreign currency also contributed to the strengthening of the ruble. Oil prices— the key export commodity of Russia— continue to be high. The Russian brand Urals traded in April at an average price of just over $70 per barrel, which is a high level, even despite a discount of 30% compared to the international benchmark Brent.
On May 23, the Ministry of Finance announced that the mandatory sale rate foreign exchange earnings by exporters was reduced from 80% (it was at this level since the end of February) to 50%.
The influx of export earnings from the sale of hydrocarbons at high prices and the strengthening of the ruble, including through internal currency restrictions, carry the risks of “Dutch disease” economy, when a high exchange rate leads to a backlog of high-tech industries and a rise in the cost of goods in the long term, and in the face of a shortage of critical imports, a strong ruble can motivate market participants to look for alternative supply channels, economists say. Experts also pointed out that due to the strong national currency, the Russian economy is becoming less competitive.
According to the Ministry of Economic Development, “now the strengthening of the ruble is at peak levels.” “Imports, capital flows will adapt to new conditions. An important role in these processes should be played by the further reduction of the key rate by the Bank of Russia,— said RBC in the press service of the department.
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