The Russian ruble has faced a significant depreciation, reaching a 32-month low of nearly 115 to $1 in recent days. According to Marek Dabrowski, this sharp decline, amounting to a 23% drop since August 2024, is a result of compounding pressures. These include U.S.-led sanctions targeting major Russian banks like Gazprombank, the weakening of oil prices, and the burdens of Russia’s war economy.
Despite relatively high oil prices earlier in the year, Marek Dabrowski notes, “The ruble’s depreciation hurts Russian consumers through its passthrough effect on prices, while also straining import-dependent sectors.” The 12-month inflation rate reached 8.5% in October, far above the Bank of Russia’s 4% target. This inflation spike reflects a broader economic struggle, including the erosion of purchasing power and fiscal pressures caused by extensive wartime expenditures.
Sanctions are further tightening the screws on Russia’s economy, with expectations of more measures from the European Union and other Western powers. While the Bank of Russia has refrained from defending the ruble to preserve foreign reserves, this stance might also serve to boost federal revenues, as a weaker ruble increases income from export-related taxes. However, this benefit is offset by growing costs tied to social and military spending.
Looking forward, Russia’s economic outlook remains bleak, as low oil demand, the weight of sanctions, and the financial drain of its invasion of Ukraine continue to converge. As Marek Dabrowski warns, fiscal constraints and structural inefficiencies are likely to dominate the country’s macroeconomic challenges in the near term.
