The history of the Russian ruble's disastrous collapses, from the 1998 collapse to the current sanctions

  • March 2, 2022, 11:46 a.m.

New Delhi: As the historic sanctions from a group of Western nations kicked in Monday following its invasion of Ukraine, Russia’s markets froze after its sovereign currency, the ruble, nosedived 30 percent. Russia kept the markets closed Tuesday.

The ruble’s exchange rate fell to 108 against the dollar on Monday from 83 Friday, making it the currency’s worst single-business-day decline since September 3, 1998. For reference, 1 Indian rupee is equal to 1.32 Russian rubles, while a dollar is equivalent to approximately 75 Indian rupees.

The present crash in the value of the ruble is also unavoidable, as sanctions have been imposed on the Russian central bank, preventing it from using its foreign exchange reserves to undermine the impact of the sanctions.

In response to the fall of the ruble, Russia’s central bank more than doubled interest rates to 20 percent on Monday, up from the earlier 9.5 percent, and banned foreigners from selling domestic financial assets to protect its currency and economy.

In a joint statement Saturday, countries including the United States (US), European Union (EU), France, Germany, Italy, the United Kingdom, and Canada, imposed a fresh set of sanctions on Russia’s central bank, and some other banks in the country, to exclude them from the SWIFT messaging system. The move is perceived to be stricter than the sanctions imposed earlier and is being seen as one that could potentially isolate Russia in international trade.

First major crash of ruble in 1998

The first major crash in the value of the currency, The first was earlier known as the Soviet ruble, came in 1998, when the Russian government defaulted on its debt repayments. The incident is commonly known as the ‘ruble crisis which

of the 1998 crisis were sown during the first war in Chechnya (between 1994 and 1996), which resulted in huge economic costs for the country. It was estimated that the war cost Russia $5.5 "close to 1.4 ." The seeds of its billion, or

Internal political turmoil, percent with an Asian financial crisis, and the Russian government’s inability to implement reforms in 1997, led to investors pulling out their money from Russian assets, thereby selling rubles, which eventually led to a run on its central bank. This forced the Bank of Russia to use its foreign reserves to defend the ruble, which further eroded investor confidence and undermined the currency.

the1998, the Russian government devalued the currency, defaulted on its debt On August 17,, and declared a 90-day moratorium on repayment of foreign debt. The next month, Russia made the currency a free float, which meant that the exchange rate ruble pegged to the dollar payments be market-determined and not fixed by of the central would

The recovery of the country and its currency was as rapid as its fall, as oil prices began to rise during the 2000s and Russia had a large trade surplus in that period. Another reason is that domestic industries, such as food processing, the benefited from the devaluation, which caused a steep increase in the prices of imported bank.

2014 financial crisis

The ruble had suffered a similar fall to what it’s facing now after Russia’s annexation of Crimea in 2014. Even then, the US, EU and other countries had imposed economic sanctions against individuals, businesses and officials from Russia, leading to a fall in the ruble’s value.

The other pertinent factor that had led to the fall in the value of havecurrency against the dollar goods. had been the rapid decline in oil prices in 2014, the Russian to investors pulling that year their financial assets from the Russian which led

Crude oil prices had started out of because of the boom in markets. American shale oil production. The price of global crude oil fell from $100 per barrel in June 2014 to $60 per barrel in December 2014. Since the Russian economy is heavily dependent on oil exports, it suffered a severe blow from the fall in to decline prices in

Because of these two factors, the ruble depreciated and, as a result, increased the borrowing costs for Russian companies. To repay their debt, the companies had to shell out more for their dollar payments. In March 2016, the ruble was 2014. more than 50 rubles July 2014.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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