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Vladimir Putin’s luck may be running out now that the ruble plunged below one cent, the lowest level against the U.S. dollar since the early days of his war in Ukraine.
The Russian president, who briefly faced down a coup attempt in June, could long point to the resilience of his currency in the face of sanctions as a propaganda victory that proved just how impotent western economic reprisals were.
More than 500 days since his army invaded Ukraine, it looks as if Moscow’s highly-respected central bank governor can no longer perform miracles for her boss.
The ruble that Elvira Nabiullina manages crashed through the psychological support of 100 to the U.S. dollar and on Monday is now worth less than a penny, the first time since March 23rd of last year.
“They’re laughing at us,” scathed Vladimir Solovyov, Russia’s most well-known state TV personality and a chief Putin ally, already last week.
The war hawk demanded Nabiullina explain herself to the population now that currency has lost roughly a quarter of its value against the dollar since the start of this year.
On Sunday, images were shared online of a small symbolic protest mounted in western Siberia: a building’s chyron kept repeating the message that “Putin is a dickhead and a thief”, calling the ruble’s exchange rate “crazy.”
Her institution, meanwhile, has countered by arguing a softer ruble does not present risks to the country’s financial stability. Nonetheless, Russia’s central bank decided to freeze purchases of foreign currency on the domestic market through the remainder of this year to restore faith in the sliding ruble.
Russia’s currency strength handed Putin a PR victory
Following a brief collapse in the initial aftermath of last year’s Feb. 24 invasion, which saw Russia’s fiat tender plunge to a record low of 120 to the dollar, the ruble rebounded to trade at one point at highs not seen since 2015 around 50 to the dollar.
This gave the Kremlin an important PR victory by suggesting Russia’s economy was strong enough to withstand anything the West threw at it.
This in turn prompted soul-searching among Ukraine’s western backers while bolstering critics alarmed more at the cost of soaring food and energy prices than at Russia’s empire-building.
“It’s slightly more valuable than it was on the day that Russia invaded Ukraine. The economic situation in the United States by contrast is deteriorating fast,” then Fox News host Tucker Carlson, a chief critic of U.S. aid to Kyiv, said last April.
The clearest signal that Russia is losing this war? #Russia Ruble weakened beyond 100 per Dollar for 1st time in 17mth, extending a slide that threatens to stoke inflation in an economy that has been kneecapped by Western sanctions. Ruble has fallen 27% vs Dollar YTD & 23% vs… pic.twitter.com/cr763vz21E
— Holger Zschaepitz (@Schuldensuehner) August 14, 2023
Nabiullina was celebrated for cleverly steering her financial system through the worst of the turmoil by placing a range of capital controls that quickly stabilized the currency and prevented mass outflows.
“They were a quick fix for the ruble in 2022, but are counterproductive in the long run,” wrote Janis Kluge, senior associate at the German Institute for International and Security Affairs, last week.
The fresh signs of economic weakness come at an important juncture in the war. The Russian army is attempting to defend large swathes of territory seized in the early months of the invasion against a Kyiv counteroffensive boasting modern western military equipment.
Any material losses on the battlefield could further undermine Putin’s authority, already weakened following the challenge made by Wagner mercenary boss Yevgeny Prigozhin in June.
