Thursday

6th Oct 2022

Russian rouble in free fall over oil price, EU sanctions

  • It is the highest interest rate increase since 1998 (Photo: Alex F)

In a surprise announcement on Monday (15 December), the Russian central bank said it would raise its key interest rate to 17 percent from 10.5 percent.

The move is aimed at shoring up the tumbling currency as the Russian economy feels the pain of a low oil price - oil and gas are Russia's main exports - combined with US and EU sanctions over Russian involvement in the Ukrainian war.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

It is the highest interest rate increase since 1998, when the Russian currency collapsed and the government defaulted on its debt, sending ripples throughout financial markets around the world.

“This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” the central bank said in a statement after its impromptu meeting.

The rouble lost 9.7 percent to 64.4 per US dollar on Monday alone, after having slid almost 50 percent this year in comparison to the dollar. One euro now buys 77 roubles, compared to 45 roubles in January.

About half of Russia's budget revenues come from oil and gas taxes and a quarter of its GDP is linked to the energy industry.

With the oil price having started to fall from above 100 US dollars a barrel in June to 60 dollars now, Russia's economy is feeling the pinch. On top of this comes the closed access to EU and US capital markets as part of the joint sanctions.

The central bank in Moscow expects the economy to contract by 4.5 to 4.7 percent next year if oil prices remain this low.

With the US and its ally Saudi Arabia determining the oil price, it is likely the squeeze will continue until Russian President Vladimir Putin reverses his course in Ukraine.

So far, he has kept a defiant stance and has offered amnesty to Russians who bring money - no matter how it was earned - back into their country.

Other forms of 'patriotic' support appear in hipster Moscow shops, with tshirts displaying the message "I support the rouble," as AP's Moscow correspondent has tweeted.

News in Brief

  1. Thousands of Hungarian students and teachers protest
  2. Swedish MEP cuts hair mid-speech to support Iran women
  3. Danish general election called for 1 November
  4. Slovenia legalises gay marriage, adoption
  5. Russia's stand-in EU ambassador reprimanded on Ukraine
  6. France warns over incoming eighth Covid wave
  7. EU adds Anguilla, Bahamas and Turks and Caicos to tax-haven blacklist
  8. Czechs warn joint-nationality citizens in Russia on mobilisation

Stakeholders' Highlights

  1. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  2. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  3. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  4. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  5. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  6. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”

Latest News

  1. EU wants to see US list on Russia financing of politicians
  2. Putin's twin aim: to break Ukraine and West's consensus
  3. Putin's diamond firm off the hook in EU sanctions
  4. The Iranian regime's expiration date
  5. Let's end Bulgaria and Romania's 11-year Schengen purgatory
  6. EU debates new pandemic-type loans to deal with crisis
  7. MEPs condemn EU Commission 'leniency' on Hungary
  8. Czech EU presidency wants asylum pledges to be secret

Join EUobserver

Support quality EU news

Join us