Introduction
Russia's currency has taken another beating. And, for the second time in less than a month, it's driven by oil prices and geopolitics.
Ruble falls to new low
The fall in value of Russia's currency comes after a series of measures taken by President Vladimir Putin to support domestic industry and curb inflationary pressure by increasing state spending or cutting taxes on companies operating in Russia.
Currency slide accelerates
The ruble has fallen by 8.1% against the dollar since the start of the year, and by another 10.6% over the past week alone. The currency is now down 29% from its peak in April 2010 and it's lost almost 60% since its all-time high in September 2017 (the lowest point for any major world currency).
Oil prices have also taken a dive over this period, falling from $50 per barrel to just over $40 at present - they're currently at their lowest level since 2003. This is partly due to sanctions imposed on Russia by Western countries due to its actions in Ukraine, but also reflects poor demand across many other commodities as well as political uncertainty about what might happen next with Donald Trump having been elected president earlier this year; there are fears that he could launch a trade war between America and China which would lead both countries' economies into recession:
Russia under pressure
Russia's economy is under pressure. The country has faced a double whammy of low oil prices and western sanctions over its military intervention in Ukraine that have cost it an estimated $50 billion in lost export revenues. The ruble has fallen by more than 50% against the dollar since mid-2014 and is at a new low as of March 2016.
The ruble was also hit hard by falling consumer confidence following Russia's annexation of Crimea in 2014, which meant many people stopped buying imports from abroad and instead went into debt to finance their purchases.
Oil price fall hits Russian economy hard
The Russian economy is suffering from a currency crisis and oil prices have dropped to a low of $30/barrel. Russia is the world's largest oil producer, and it accounts for around half of Russia's budget revenues. Oil price drop has caused a currency crisis in Russia. The rouble has fallen to its lowest level in more than two years against the US dollar on Wednesday, amid falling commodity prices and Western sanctions over Moscow's role in Ukraine.
Russia's central bank said on Thursday it was seeking ways to limit losses suffered by citizens as they hold foreign currencies due to Western sanctions imposed over its actions in Ukraine after Viktor Yanukovich was ousted from power by protests last year that turned violent when security forces used live ammunition against demonstrators outside parliament building."
Global market impact
The Russian currency has been experiencing a significant drop in value since the beginning of 2019, with the ruble losing around half its value against the dollar.
This is due to a combination of factors:
Economic slowdown - Russia's economy is currently experiencing its worst downturn since 1998 and there are fears that this could lead to mass unemployment as companies cut back on spending and reduce output levels.
Oil price fall - Russia's largest oil producer Rosneft recently said that production would be reduced by 400,000 bpd from January 2020 until December 2021 as part of an austerity programme designed to help reduce debt levels within the sector.
Kremlin oil fear
Russia's economy is severely affected by the fall in oil prices, as it is one of its main exports. Oil accounts for about half of Russia’s total exports, and with a decrease in price, this number will likely drop further. The Kremlin has stated that if this happens then the country may not be able to pay off its debts and might face default.
The drop in oil prices has been caused by a combination of factors: supply glut from growing production; sanctions on some countries such as Iran; falling demand due to economic stagnation worldwide; and supply disruptions caused by war or political instability (such as those seen in Venezuela).
The causes and effects of the crisis
The crisis is caused by the fall in oil prices. The Russian economy has been hit hard by this, as it was one of the largest importers of oil and gas. It also means that Russia's government needs to find new sources of revenue if it is going to continue funding its budget deficit.
The effects have been felt across all sectors in Russia, including banks and companies which rely on high revenues from oil sales. In fact, many companies have already defaulted on loans or halted dividend payments due to lack of funds (which could lead them into bankruptcy).
Other countries such as Saudi Arabia, Iran and Venezuela have also been affected because they depend heavily on imported goods from Russia: these countries may see their own currencies depreciate against the ruble due to fears about future economic instability within Russia itself
Brace yourself for more pain ahead
As the crisis continues to unfold, it's important to keep an eye on what's happening around you. You might be wondering when this will end and how it will affect your business. Or perhaps you're trying to figure out whether or not your company should use Russian currency in its day-to-day transactions.
The answer is simple: don't worry too much! If anything, this is just another example of how strong our global economy really is—even though we've had some rough patches along the way (which we'll discuss below).
Conclusion
With the ruble already at its lowest level in over a decade and oil prices continuing to fall, there is little doubt that Russia is facing an economic crisis. The largest country in the world is currently experiencing one of the worst recessions it has seen since 1991, with GDP expected to shrink by 0.5 percent this year according to IMF forecasts. The government has been trying to keep up appearances through tight monetary policy and spending cuts aimed at saving money in case things get worse.
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