the collapse of the ruble It is of particular importance not only for investors, but also for Russian citizens, who now also have to deal with the capital controls imposed by Putin after the invasion of Ukraine. The plan to isolate the tsar, which triggered a whole series of severe sanctions from the West, has caused a real uproar Black market of the rublewith tons of people rushing to exchange money in US Dollars or Euros and bypassing government bans.
How Russians trade rubles and circumvent Putin’s bans
Several chats were born in the messaging app of telegram Used by people in Russia to organize meetings aimed at buying foreign currency. The phenomenon was brought to light by Mediazona, an independent Russian media outlet. According to the report, more than 2,000 people participated in these chats, most of them from Moscow, St. Petersburg and the southern Kuban region.
the Dates for the exchange of rubles (for dollars or euros) they would have taken place and in reality continue to take place in train stations and in less unexpected places (like restaurants and cafeterias) so as not to attract attention or arouse suspicion.
Not all Telegram chats are aimed at trading, some simply offer advice how to “save” your savings. Now that the ruble has collapsed, that refers to those who are currently selling or buying foreign exchange.
What is the risk of those who change and sell the ruble now in Russia
Journalistic research gets a lot of media coverage because it brings to light a system that actually exists able to circumvent Putin’s laws. Since the sanctions have squeezed Moscow’s finances (this is where the oligarchs have come under the crosshairs), there have been several attempts by the Kremlin to prevent the ruble from collapsing.
For this reason, the Russian authorities have responded with a warning who currently sells or buys the ruble with euros or dollars. Currency exchange organized with messaging apps, online and/or on social media they explained could fall under this Laws against “illegal banking” and criminal penalties could apply up to seven years in prison.
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Because the ruble collapsed after the invasion of Ukraine
Already a few days after the invasion of Ukraine In Russia, there were many people who, fearing the conflict, ran to banks and branches to withdraw cash in dollars or euros.
The move to accept payments only in rubles (here the risky sectors) is therefore aimed at increasing the demand for Russian currency on the international market, which was already increasing against the dollar in the weeks before Russia invaded Ukraine weakened from about $75 to the dollar between early 2022 and the Russian invasion of Ukraine in February to about $85 to the dollar (meaning it took an extra 10 rubles to buy a single dollar on the international market ). The situation then deteriorated after the invasion The value of the ruble plummeted to almost 145 in fifteen days.
The result of Sanctions from Europe and the West it was the weakening of trade and financial mechanisms. And that, in turn, caused the ruble to fall, because nobody wanted to hold the currency of a country with which one can no longer trade freely. Seeing that the value of the ruble was losing its attractiveness, the Kremlin imposed a series of capital controls to stem large currency outflows.
From that moment, the ruble recovered almost to preinvasion levels and continued to rise, so Vladimir Putin’s strategy was refined and moved to the next step: he ordered gas importers to pay in rubles instead of dollars or euros (the reason for this We have explained the decision and the consequences to you here).
Is Putin’s strategy working?
On March 23, the Russian President urged European countries to pay for all natural gas imports in rubles instead of US dollars or euros. It is easy to learn why the delivery stop could trigger an energy crisis: currently The European Union imports 40% of its natural gas needs from Russia. The EU can therefore not suddenly reduce its dependence on energy imports from Moscow, let alone cut supplies completely.
After the sanctions introduced and imposed by Putin Russian companies that no longer use the dollar or the euro, European companies are now forced to find mediatorthose who accept dollars and euros exchange them for rubles and make Europeans pay for natural gas imports.
At this point, a question spontaneously arises, namely: if direct dollar/euro exchange into rubles is not possible, What currency could be used as an intermediary? According to experts, the most likely answer is the Chinese yuan (which could replace the dollar, which dominates the international trade market). In such a scenario, dollars/euros would be exchanged for yuan, which in turn would be exchanged for rubles.
With the ruble rallying internationally, many might see Putin’s feat as a feat, but the truth is this mechanism will last until Europe finds an alternative. From today’s perspective, the balance is secured because, as we said, the West is dependent on Russian energy and cannot do without it overnight, but everything could collapse at any moment, especially if as analysts predicted the EU decides to impose More tariffs on Russian oil imports. In fact, therefore, a third phase of attack could be opened, with the approval of new sanctions that will make it possible to gain ground and complete the purchase of Russian supplies at a greatly reduced price.