Russia’s ruble stages rebound despite Western sanctions

After a historic collapse in the wake of Russia’s military offensive in Ukraine, the ruble has staged a spectacular bounceback, supported by strict capital controls and energy exports. 

But analysts say that success is in many ways artificial and does not bode well for the health of the Russian economy.

The Feb. 24 military operation triggered unprecedented Western sanctions on Moscow, sending the ruble into free-fall and accelerating already high inflation. 

Four days after President Vladimir Putin sent troops into the pro-Western country, the central bank more than doubled its key interest rate to 20% to prop up the financial system. 

In a surprise move on Friday, the central bank lowered the rate to 17%, saying risks to financial stability had “ceased to increase” for now.

“It’s clear that the Central Bank of Russia assesses that Russia’s economy is now emerging from the most acute phase of its crisis and that such restrictive monetary conditions are no longer warranted,” said Liam Peach, emerging Europe economist at Capital Economics.

The ruble’s return to levels last seen before the start of Moscow’s military campaign is a sign that the economy may be adjusting to the sanctions, economists say.