The Russian ruble tumbled in value on Monday, February 28, falling by almost 30 percent amid the sanctions announced in reaction to Russia’s invasion of Ukraine. After seeing as low as 119 per US dollar in the early hours of the day, the ruble is currently trading at slightly above 100 against the US dollar, down from 84 against the dollar at closing time on Friday. After Russia started military attacks on Ukraine on February 24, the global community led by the US and the EU announced certain sanctions on Russia, including banning the country from the global SWIFT payment system and imposing sanctions on several Russian banks, as well as individuals such as the country’s president, Vladimir Putin, and the foreign minister, Sergey Lavrov. The real dollar exchange rate has already become much higher and most citizens are unable to secure foreign currency. Russia’s Tinkoff Bank, the country’s second-largest credit card issuer, was quoting the dollar at RUB 153-171 on Monday.
“It [cutting Russia from SWIFT] means that Russian banks carry out any money transfers, LC issuances and bond transfers. So, this is completely taking them out from the banking system,” a steel business source told SteelOrbis, adding that all currencies will be involved and this will block all banking transactions.
Another effort to stop Russia by the Western world is the freezing of the Russian central bank’s assets. The country’s central bank has about $630 billion in foreign reserves and now most of them will be inaccessible.
To help stabilize the country’s financial markets, the Russian central bank has raised interest rates to 20 percent from 9.5 percent. Despite these efforts, the sources believe that there is more room for the ruble to drop before seeing the bottom. A Deutsche Bank analyst said that Russia’s ability to transact at a global level will be severely impacted and “financial markets are expected to reflect intensifying risks to energy supplies, denting investors’ willingness to buy risky assets and potentially also dragging down the euro.” Additionally, rating agency S&P has lowered Russia’s credit rating to ‘junk’ status, while Moody’s has put it on review for a downgrade to junk.