The value of the ruble tumbled sharply against the U.S. dollar on Wednesday, on signs the latest wave of sanctions from Western countries are beginning to impact Russia’s economy.
Russian finance minister Anton Siluanov told journalists on Tuesday that the G7 economies, plus the European Union and Australia, imposing an oil price cap at $60 per barrel, is squeezing Russia’s export income.
This could widen Russia’s budget deficit than the planned 2% of GDP in 2023, Reuters reported on Tuesday. In losses that intensified as U.S. markets opened, the ruble
slumped 3% to 72.45 dollars early Wednesday.
“Is a bigger budget deficit possible? It is possible, if revenues are lower than planned. What are the risks next year? Price risks and restrictions,” Siluanov said in approved comments to reporters.
The sanctions, which took effect on Dec. 5, were imposed in retaliation to Moscow withdrawing oil flows to Europe and to limit Russia’s funding of its military campaign in Ukraine.
The Russian ruble has consequently dropped, losing some of its summer gains when it benefited from higher oil prices.
“The ruble will continue to weaken because there’s no fundamental demand [for it],” Vladimir Milov, a Russian opposition politician told the New York Times on Monday.
Meanwhile, Russia’s central bank is likely to drop the U.S. dollar and buy Chinese yuan on the foreign exchange market, in a bid to reduce reliance on Western finances, Reuters recently reported.
This year, yuan-ruble
trading on the Moscow’s currency exchange has increased from 1% to 40-45%, while the share of dollar-ruble trades have been slashed in half to 40%.