The Russian ruble by Wednesday had recovered from the fall it needed as US and European allies moved to bury the Russian economy under thousands of new sanctions over its invasion of Ukraine. Russian President Vladimir Putin has resorted to extreme economic measures to ease Western sanctions and inflate his currency. While the West has imposed unprecedented levels of sanctions on the Russian economy, Russia’s central bank has raised interest rates to 20 percent and the Kremlin has imposed stricter capital controls on those who want to exchange their rubles for dollars or euros. It is a monetary defense that Putin may not be able to withstand, as long-term sanctions are straining the Russian economy. But the ruble’s recovery could be a sign that sanctions in their current form are not working as vigorously as Ukraine’s allies expected when it comes to forcing Putin to withdraw his troops from Ukraine. It could also be a sign that Russia’s efforts to artificially support its currency are working through leverage in its oil and gas sector. The ruble traded at about $ 85 per US dollar, about where it was before Russia launched its invasion a month ago. The ruble had fallen to about $ 150 a barrel on March 7 when news broke that the Biden government would ban imports of Russian oil and gas from the United States. Speaking in the Norwegian parliament on Wednesday, the Ukrainian president urged Western allies to inflict even greater economic pain on Russia. “The only way to urge Russia to seek peace is through sanctions,” Volodymyr Zelensky said in a video message from his besieged country. He added: “The stronger the sanctions packages, the faster we will restore peace.” Increasingly, Russian oil and gas markets from European countries are coming under control as a window and lifeline for the Russian economy. “For Russia, it’s all about its energy revenues. It’s half their federal budget. “This is what supports the Putin regime and the war,” said Tanya Babina, a Ukrainian-born economist at Columbia University. Babina is currently working with a team of 200 Ukrainian economists to more accurately document how effective Western sanctions are in thwarting Putin’s military capabilities. The ruble also rose amid reports that the Kremlin was more open to ceasefire talks with Ukraine. US and Western officials have expressed skepticism about Russia’s announcement that it would withdraw its operations. President Joe Biden promoted the success of sanctions – some of the harshest ever imposed on a nation – while in Poland last week. “The ruble turns into debris almost immediately,” Biden said. Sanctions on Russian financial institutions and companies, on Putin’s trade and power brokers, have hampered the country’s economic growth and pushed hundreds of international companies to stop operating there, Biden said. Russia’s efforts to tackle these sanctions by supporting the ruble can only reach so far. The Central Bank of Russia can not continue to raise interest rates because this will eventually stifle credit to businesses and borrowers. At some point, individuals and businesses will develop ways to circumvent Russia’s capital controls by shifting money to smaller amounts. As sanctions put pressure on the Russian economy, economists say this will eventually burden the ruble. Without these efforts, Russia’s currency would almost certainly be weaker. But Russia’s oil and gas exports continued to Europe, as well as to China and India. These exports have served as an economic floor for the Russian economy, which is dominated by the energy sector. In the European Union, dependence on Russian gas for electricity and heating has made it much more difficult to turn off the cover, as the Biden administration did when it banned the relatively small amount of US oil imported from Russia. “The United States has already banned imports of Russian oil and gas and the United Kingdom will phase out them by the end of this year. However, these decisions will not have a significant impact unless the EU follows suit, “Benjamin Hilgenstock and Elina Ribakova, economists at the Institute of International Economics, wrote in a report released Wednesday. Hilgenstock and Ribakova estimate that if the EU, Britain and the US ban Russian oil and gas, the Russian economy could shrink by more than 20% this year. This compares with forecasts of a reduction of up to 15%, as sanctions now apply. Knowing this, Putin has made great use of Europe’s dependence on energy exports to its advantage. Putin has called on Russia’s central bank to force foreign gas importers to buy rubles and use them to pay for state-owned gas supplier Gazprom. It is unclear whether Putin can carry out his threat. The White House and economists have argued that the impact of sanctions takes time, weeks or months for full force as industries close due to a lack of materials or capital, or both. However, critics of the government say the ruble’s recovery shows that the White House needs to do more. “The recovery of the ruble seems to indicate that US sanctions have not substantially crippled the Russian economy, which is the price Putin’s should have paid for his war,” said Sen. Pat Toomey, R-Pa. “To give Ukraine a chance at war, the United States must cut off Putin’s revenue flow by cutting off Russian oil and gas sales worldwide,” Toomey told the Associated Press. Senator Sherrod Brown, chairman of the Senate Banking, Housing, and Civil Affairs Committee, said Wednesday that lawmakers are considering ways to extend Biden’s recent sanctions on members of the Russian parliament “and possibly extend them to other politicians.” ». Brown, in D-Ohio, said lawmakers are also weighing in on more sanctions against banks. Western leaders, encouraged by Biden, have adopted sanctions as their toughest weapon in a bid to force Russia to reverse its invasion of Ukraine, which is not a NATO member and is not protected by its mutual defense policy. block. Some of the allies now acknowledge that their governments may need to double the economic sanctions against Russia. British Prime Minister Boris Johnson said on Wednesday that the Group of Seven major industrialized nations should “intensify sanctions on a rolling basis until each of Putin’s troops leaves Ukraine.” But this is a tougher demand for other European countries, such as Germany, which depend on Russia for vital gas and oil. The EU receives a total of 10% of its oil from Russia and more than a third of its gas. Many of these countries are committed to getting rid of this addiction – but not immediately. If European nations do move away from Russian oil faster, wrote Atlantic Council analyst Charles Lichfield, “a more comprehensive embargo from Europe would threaten Russia’s current account surplus – suddenly making it difficult for the public sector to pay. and the war. ” He noted that “such an outcome could be beyond the reach of the Western consensus.” —- Sweet reported from New York. AP congresswoman Lisa Mascaro contributed to this report.
