The plunging Russian currency, the ruble, has added to inflationary pressures in Russia, British officials have said, as the country faces further economic turbulence exacerbated by the ending of its natural gas transit deal with Ukraine.
On Friday, a US dollar value 110 rubles, weeks after reaching a minimum of war of 114 in November that the United Kingdom Ministry of Defense said “almost” on Friday through the new circular of the Treasury sanctions of the United States.
It occurs when Russia has expanded a virtual ruble program that can mitigate the effect of sanctions and facilitate trade. Newsweek contacted Russia’s Ministry of Finance to get a comment email.
Vladimir Putin has set aside 40% of Russia’s budget for the military, yet his continued investment from the war has faced setbacks from Western-led sanctions, reducing revenues from herbal fuels and inflation driven through shortages.
The Russian ruble was 110 to the U.S. dollar on Friday, and while this is not the lowest level it has reached in recent weeks, having hit 114 on November 26, the U.K. MOD said that drop was the latest symptom of a “continued overheating of the Russian economy.”
Foreign currency flows in Russia face disorders with limited exporters through oil and sanctions. In addition, the development load of cross transactions increases the value of imports that add to the descending voltage in the ruble.
Russia’s Central Bank (CBR) said it would pause the purchase of foreign currencies and the ruble remained above 100 to the greenback until December 20.
Against the expectations, the CBR did not increase the additional key interest rate of an already record top, however, the MOD of the United Kingdom said that the measure “will probably rise to imbalances in the economy” because the inflationary has a Effect on depression ruble, labor shortage and high government spending.
“Criticism of high interest rates is expanding among Russian companies,” said the evaluation. “However, inflationary pressures are also intensified, partly due to the recent depreciation of the ruble. “
Natural fuel exports have already gone through sanctions, the major bank involved in energy resource trading, Gazprombank, one of 50 sanctions on Russian monetary establishments through the United States in November, prompting a fresh dip in the ruble.
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Meanwhile, Gazprombank was among 12 financial institutions that were in the pilot program for the digital currency launched in August 2023.
This scheme has been expanded to include Sberbank, Russia’s largest financial institution, and Tinkoff Bank, known as Tbank as well as Tochka Bank, which offers digital banking services for small- to medium-sized businesses.
“The main objective of the virtual ruble pilot is to rationalize and internal law among Russian residents,” a Russian lawyer who supplies Russian businesses in China and the region in the region in the broad sense of the region.
“In theory, the digital ruble could eventually be used in transactions with neighboring countries, provided that counterparties accept this payment method. In practice, however, numerous challenges persist, including forex control regulations, both in Russia and other countries,” such as China.
“Foreign corporations are not in a position to adopt virtual ruble or virtual monetary assets (DFA),” he added.
The main channel of invoices is still classic bank invoices through unsanctioned banks and payment agents, while some transactions can be done with stablecoin invoices, for example, USDT. “In the future, it is more likely that the use of cryptocurrencies for bills will accumulate faster than the adoption of the virtual ruble,” he added.
The British Ministry of Defence said: “Criticism of high interest rates is developing among Russian companies. Inflationary pressures are also intensifying, in part due to the recent depreciation of the ruble. “
Independent Russian Outlet The Bell said on November 30: “There are few other features to be had for the authorities, and the ruble will almost indeed see more volatility. “
Pavel Bazhanov, a Russian lawyer, told Newsweek: “Foreign corporations are not yet in a position to adopt virtual ruble or virtual monetary assets (DFA). “
The depreciating Russian ruble comes at a tricky time for the country whose gas giant Gazprom faces a loss of revenues of around $5 billion a year after Ukraine refused to extend a natural gas transit deal that expired on December 31.
Just after the ruble hit its low of 114 against the greenback, a drop of 11 percent over the year, independent Russian financial news outlet The Bell said on November 30 “there are few good options to stabilize the currency market.”
The Russian government can extract from the National Welfare Fund, but “the ruble will almost see more volatility” and “more sudden fluctuations are inevitable. “
Brendan Cole is a Newsweek Senior News Reporter based in London, UK. His focus is Russia and Ukraine, in particular the war started by Moscow. He also covers other areas of geopolitics including China. Brendan joined Newsweek in 2018 from the International Business Times and well as English, knows Russian and French. You can get in touch with Brendan by emailing [email protected] or follow on him on his X account @brendanmarkcole.