The Sanctions Are Hurting The West, Not Russia

Ruble named world’s best-performing currency 

Bloomberg says the Russian currency topped 31 major peers in growth this year

RT: The Russian ruble has eclipsed 31 major currencies in growth since the start of 2022, becoming the globe’s best-performing currency, Bloomberg reported on Wednesday.

According to the publication, the ruble has strengthened against the US dollar by more than 11% since the beginning of the year. On the international currency market, the ruble exchange rate has shown even greater growth of about 12% so far.

During trading on the Moscow Exchange on May 12, the exchange rate dropped to 63 rubles against the US dollar – its strongest since February 2020, and 65 rubles against the euro – the strongest in nearly five years.

The Russian currency overtook the Brazilian real in terms of dynamics, which also showed significant growth of almost 9%. Third position in the best-performing currency ranking is occupied by the Mexican peso with a growth of 1% against the greenback.

The ruble dropped to historic lows against both the dollar and the euro in March after the US and its allies imposed severe economic sanctions on Russia over the conflict in Ukraine.

However, the Russian currency began to strengthen dramatically after the government introduced a series of support measures and has been on the rise since then. In addition to the introduction of temporary capital controls, the Russian Ministry of Finance has obliged Russian exporters to sell 80% of their foreign exchange earnings. The introduction of a ruble-based mechanism for gas export payments also helped stabilize the ruble, increasing the supply of the currency on the market and boosting the ruble demand.

Bloomberg points out, however, that some Western analysts say the ruble’s upturn is artificial. It cites “some strategists” who claim “the rally isn’t credible as many currency-trading shops have stopped dealing in the ruble on the grounds that its value seen on monitors is not the price it can be traded at in the real world.”

Other countries, most notably, Turkey and Argentina, have also recently introduced capital controls, but failed to achieve the same results as Russia, Bloomberg notes. Since the beginning of 2022, the Turkish lira has depreciated by 13% against the dollar, while the Argentine peso is down by 12.3%.

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Russian economy stronger than expected – JPMorgan 

The Wall Street bank predicts only a moderate recession due to sanctions

RT: Russia's economy is coping better with Ukraine-related Western sanctions than could be expected, JPMorgan Chase said in a note to clients dated last week and made public on Monday.

According to the biggest US investment bank, business sentiment surveys from the country “are signaling a not very deep recession in Russia, and therefore imply upside risks to our growth forecasts.” It also cited high-frequency indicators such as electricity consumption and financial flows, which signal that the economy is in better shape than predicted.

“The data at hand therefore do not point to an abrupt plunge in activity, at least for now,” the bank’s analysts state in the note, as cited by Business Insider.

JPMorgan also backtracked on its earlier forecasts of a 35% drop in Russian GDP in the second quarter and 7% for all of 2022, now saying the figures are likely to be much less alarming. The bank did, however, note that the impact of current and potential sanctions will be felt, and that the country’s economy would be in far better shape if Moscow had not launched its military operation in Ukraine.

“The impact of sanctions will continue building in coming quarters, we expect. The GDP profile, therefore, looks increasingly likely to be consistent with a drawn-out, but not very sharp recession,” the analysts predict, noting that export orders are showing a particular decline.

Russia has faced unprecedented economic restrictions since it launched a military operation in Ukraine, drawing intense condemnation from the West. The US has, among other measures, placed an embargo on Russian oil, one of the country’s major export commodities, while the EU is currently preparing its sixth package of sanctions, and also considering an oil ban. Russia has been cut off from the SWIFT interbank messaging system, while banks, organizations and individuals have been sanctioned, and assets including half the country’s forex reserves have been frozen. Russia has responded with countermeasures and managed to bring the national currency, the ruble, back to its pre-conflict level after a historic drop, but there is still much uncertainty among analysts as to the future of the economy.

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