Rouble’s strength piles pressure on Russian war economy

{"text":[[{"start":11.3,"text":"The Russian rouble has surged to its strongest level in more than three years on the back of widening trade imbalances and high interest rates, adding to strains on the country’s budget as Vladimir Putin’s war against Ukraine drags on in its fifth year. "}],[{"start":26.200000000000003,"text":"The currency has risen more than a fifth in value against the dollar and the euro since March 19, shortly after Donald Trump extended a waiver of sanctions on Russian oil as the US-Israeli war in Iran sparked a global energy crisis. "}],[{"start":41.550000000000004,"text":"While earnings from oil exports have accelerated, the resulting appreciation in the rouble has made other exports less competitive, with weak imports due to sanctions and Russia’s stagnant economy limiting the impact on inflation from cheaper imported goods."}],[{"start":56.95,"text":"“Russia’s economy is export-oriented, so a significant strengthening of the national currency does more harm than good,” said Alexander Potavin, an analyst at Moscow brokerage Finam. "}],[{"start":68.5,"text":"A senior executive at one of Russia’s largest banks added that an “excessively” strong rouble was “effectively a tax on exporters”. "}],[{"start":77.25,"text":"The rouble is at its strongest against the US dollar since February 2023 and has gained more than 60 per cent in dollar terms since a trough at the beginning of last year. It is trading at about Rbs71 to the dollar, from Rbs115 on January 1, 2025."}],[{"start":96.15,"text":"Speaking at an industrial conference this month, Putin described the “strong rouble” as one of the “sad” issues facing the national economy. "}],[{"start":104.7,"text":"Energy exports contribute about a fifth of the government’s budgetary revenues. While such earnings have been boosted by the Iran war, the resulting currency appreciation has hit other exports at the centre of Russia’s economy such as iron, steel, fertiliser and wheat."}],[{"start":121.1,"text":"“We see that the exchange rate is simply killing the [Russian] grain trade right now,” said Masha Belikova, analyst at Fastmarkets Agricensus in Dnipro, Ukraine."}],[{"start":130.45,"text":"Russian grain exporters were struggling to set prices at levels that would be profitable without losing competitiveness, Belikova said. "}],[{"start":null,"text":"

"}],[{"start":138.35,"text":"The rally since the start of last year has mainly been driven by the trade imbalance, as Russia sells more overseas than its stagnating economy imports. Many channels for capital outflows, such as dividend payments and Swift transfers, remain closed."}],[{"start":154.1,"text":"The central bank’s policy interest rate remains at 14.5 per cent to tackle inflation running at an annual 5.6 per cent in April, although both have fallen from a year ago, when interest rates were 21 per cent and inflation about 10 per cent."}],[{"start":170.45,"text":"“In the coming years, the rouble will remain stronger than many would like,” economy minister Maxim Reshetnikov said last month. “That will be a major challenge, alongside a tight labour market.”"}],[{"start":182.64999999999998,"text":"“The rouble is getting stronger . . . and it is killing our exports in addition to already existing restrictions: logistics, insurance, sanctions, etc,” Alexander Shokhin, the president of Russia’s biggest business lobby group, told Russian radio. "}],[{"start":199.39999999999998,"text":"Businesses worry that the strong rouble could leave the government budget short of export revenues, prompting a further increase in taxes on companies, Shokhin said."}],[{"start":209.59999999999997,"text":"For now, the pressure on state finances remains manageable, said Sofya Donets, economist at Moscow brokerage T-Investments, as this year’s national budget is based on sales of Russian oil at $59 a barrel and rising exports have offset the fall in rouble revenues as the currency appreciates."}],[{"start":228.84999999999997,"text":"Nevertheless, energy revenues in the first four months of this year were down 40 per cent from the same period last year, partly because of the strong currency."}],[{"start":238.64999999999998,"text":"Analysts at CMASF, a Russian economic think-tank, said the rouble was a “significant risk” to budget revenues and could leave the state short of Rbs1.6tn to Rbs1.7tn ($22.5bn to $24bn) by the end of this year."}],[{"start":257.15,"text":"Despite the budgetary strains, Moscow was unlikely to turn to unorthodox measures to weaken the rouble, analysts said. "}],[{"start":264.7,"text":"“The central bank remains committed to the view that a floating exchange rate helps the economy adjust to external shocks,” said Sergey Romanchuk, a veteran Russian foreign exchange trader. "}],[{"start":275.45,"text":"Any change to that approach would only come if the rouble strengthened “to truly extreme levels”, he said."}],[{"start":281.95,"text":"Additional reporting by Max Seddon in Berlin "}],[{"start":292.15,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779953823_4844.mp3"}