Nearly three years after the start of the war in Ukraine, the conflict has entered a new phase, with a new round of US sanctions against 50 Russian banks. If this move achieves its goal, it will force the European Union to stop buying Russian gas on the market, and this was one of the main sources Russia had to keep its currency, the ruble, afloat. Thus, once the sanctions are announced, The Russian currency has fallen on the market to levels not seen since the start of the war: The currency fell to 113 rubles to the dollar, triggering intervention by the Russian central bank to try to support its price.
On November 21, the United States announced a new wave of sanctions, which affected 50 Russian banks, including Gazprombank. The latter has been a key element since the start of the war in Ukraine for Russia to obtain foreign currencies, since it was the key institution for channeling the euros with which the European Union paid for Russian gas.
The sanction represents a new obstacle for Russia which wishes to receive euros, and the markets have understood this. The price of the ruble fell on Wednesday, once expectations began that Russia would not have foreign currencies to back its own. The move was one of the most aggressive in living memory in a single market day, falling more than 15% on the day.which led the Russian currency to touch 113 rubles to the dollar, the lowest price seen since March 2022, shortly after the start of the war.
The reasons for American sanctions
What has been happening in recent weeks in relations between the West and Russia appears to be linked to the possibility that negotiations to end the war are upon us. Donald Trump’s victory in the US presidential election earlier this month is a key factor in the equation, with the new US president publicly announcing his intention to end the conflict as quickly as possible.
Both sides, the Western bloc and Russia, appear destined to sit at the negotiating table in the coming months, increasing the rush for a strong stance on peace talks. If Russia, for example, is stifled by its inability to take Kursk, or if it suffers economically from new sanctions, it could accept more favorable conditions, and vice versa from the Ukrainian side.
This could have to do with the decision of the United States to sanction Gazprombank and leave the European Union in a situation of energy vulnerability, no longer able to receive Russian gas, even though it has been importing it via the bank for almost 3 years. Russian war. Gazprombank played a key role in receiving euros and exchanging them for rubles, which provided a source of stability for the Russian currency. Now that it no longer has access to the European currency, the market has panicked with the ruble and its price is suffering.
The United States also has an additional interest with its sanctions: Russian gas could be replaced by American liquefied natural gas, after the American country increased its production of the energy raw material in recent years and increased its exports to the country . European continent. Indeed, Ursula Von Der Leyen, the European Commissioner, has already declared that American gas could replace Russian gas, after having had a telephone conversation with Donald Trump.
The Russian central bank follows through on its decision
In mid-October, as the ruble collapsed and approached 100 rubles to the dollar, Russia’s central bank said it was not worried about declines in the currency, even though they could ultimately fuel the ‘inflation. The central bank is currently trying to reduce an inflation rate of more than 8%, but it appears that it will have to suspend this attempt, at least until the currency stabilizes.
The central bank, according to sources Bloomberg Knowing their intentions, they had no problem seeing the ruble above 100 rubles to the dollar, but this Wednesday’s move, which brought it to 113 rubles to the dollar, already seems excessive in the eyes of the lords of money: the central bank just announced that it will stop purchasing foreign currencies domesticallyat least until the end of the year, with the aim of reducing market volatility.
The move is likely aimed at supporting the ruble or, at least, not contributing further to its decline, as central bank purchases of foreign currencies put additional downward pressure on the local currency.
