Barely recovering from recent anti-records, the ruble suddenly returned to levels that the Russians had not seen for several years. The BBC explains why this happened, how much the ruble is really worth, and why its apparent strengthening says nothing about the real state of the economy.

Last week, Bloomberg called the ruble the most efficient currency. Since the beginning of the year, it has appreciated by 11% – stronger than the other 30 currencies monitored by the agency. Strengthening since the beginning of the year is the criterion by which Bloomberg evaluates “effectiveness”.

The Russians themselves can see that, despite the war, the exchange rate on the Moscow Exchange has dropped to almost 62 rubles per dollar. This is not even the pre-war, but the pre-pandemic level. The last time such a course was at the beginning of 2020. The euro exchange rate completely updated the record of 2017, dropping below 62 rubles at auction on Thursday.

The same Bloomberg, in another article, says that the profile association of traders in emerging markets (EMTA) recommended that they not focus on the values of the ruble on the Moscow Exchange. Instead, they were asked to look at the ruble exchange rate on Refinitiv, a British-American financial data provider. On May 11, when this recommendation became known, the rate there was two rubles per dollar higher than on the Moscow Exchange.

“With a complete ban on currency ownership and nationalization of imports […] one dollar may well be equal to 75 kopecks, such [this ratio] was in its time. But what does it have to do with the exchange rate? And how can it be used in real economic activity? ” – writes economist Andrei Movchan.

Less savvy in economic matters, social media users express their attitude to the situation with a meme: “Are you selling a dollar? No, we’re just showing.”

“The exchange rate is now market-oriented, it’s just that the ‘markets’ are different,” Sergei Romanchuk, head of operations at Metallinvest Bank in the foreign exchange and money markets, says in a conversation with the BBC.

He means that now currency is bought for rubles in different ways for different purposes. In all cases, the rate is different, at the beginning of the war the difference was about 10-20%. Now the cost of a dollar or euro may differ by several rubles.

The spread – that is, the difference between the exchange rate or the rate of the Central Bank and the exchange rates of its sellers – was before. But the difference was much smaller than now.

After the start of the war, the regulator set the commission at first at 30%, and then at 12% for the purchase of currency on the stock exchange. It was canceled at the beginning of April. The exchange rate at the time of writing this material was at the level of 62 rubles per dollar and 64.4 rubles per euro .

But there is a problem with this scheme: dollars and euros bought on the stock exchange through a brokerage account can only be withdrawn to a bank account. If this happened after midnight on March 9, it would be the “new” currency from the bank’s point of view. Until September 9, it can only be withdrawn in rubles. “A cash dollar is not equal to a non-cash one now,” emphasizes Romanchuk from Metallinvest.

This is both a simple and profitable way to change money. But there is a caveat: dollars and euros, which were credited to the account after midnight on March 9, can also be withdrawn only in rubles until September. This Thursday, May 19, the Central Bank allowed banks to sell other currencies (except dollars and euros) to the public without restrictions.

In the Sberbank online bank, you can buy a dollar for 68.64 ruble , and the euro – for 71.76 rubles ( 6.64 and 7.36 rubles more expensive than on the stock exchange). In Tinkoff, the dollar costs 66.3 rubles , the euro – 69 .

Such a purchase has an obvious plus: real dollars are given out on hand. But the rate is not very profitable, and there are relatively few exchangers where they are ready to issue dollars and euros.

For example, in large branches of Sberbank, where there is currency (as stated on the bank’s website), the dollar is sold at 78.49 rubles , the euro at 85.17 rubles ( the difference with the exchange rate is 16.5 and 20.7 rubles, respectively). And even so, as The Bell wrote , Sberbank sold it only to premium customers.

On the VTB website, in the exchange rate section for cash transactions, only the rate at which the bank is ready to buy dollars and euros is named. There is simply no selling rate (although it is indicated for non-cash transactions).

According to the Banki.ru aggregator, Ak Bars offers the most favorable dollar exchange rate in cash – 69.16 rubles ( the next bank in the rating is Realist with a rate of 72.5 rubles per dollar ). The euro exchange rate is 71.84 rubles for the same Ak Bars (the difference with the exchange rate is 7.2 and 7.84 rubles, respectively).

This is a slightly more extravagant, but popular among emigrants, way to convert rubles into dollars and euros. USDT (Tether cryptocurrency, the exchange rate of which is “pegged” to the value of the dollar) at the time of writing this material could be bought for 62.53 rubles on the Binance crypto exchange and for 69.7 rubles on the EXMO exchange (plus 53 kopecks and 7.7 rubles to the exchange rate, respectively).

To get a currency exchange, you need to buy USDT for rubles and sell for dollars or euros (such an exchange can also be done through other crypto assets, USDT is a good example, because its value depends on the dollar exchange rate). There may be a commission, which varies depending on the platform and the details of the transaction. It can be “added” to the losses during the exchange.

In general, this is the name of one of the most ancient money transfer systems that appeared in the Middle East and Asia around the 8th century. The bottom line is that its participants can send money to each other without actually transferring: the netting takes place between the “branches” of the system in different countries.

For Russians in 2022, hawala works through Telegram chats and emigrant Facebook groups. Some participants offer others help with the conversion and withdrawal of money from Russia abroad.

As a rule, the organizers of the scheme have rubles on a Russian card and dollars or euros on a foreign one. They receive a transfer from card to card in Russia, and then make the same abroad. At the same time, the money is not physically transferred anywhere.

The course is individual – who will agree. The commission is about 2.5% of the amount, writes Forbes Global Russians (Russian Forbes project).

The Russian currency is strengthening for three main reasons.

Firstly, a lot of goods are exported from Russia, and very few are imported into it. The dollar and euro exchange rate against the ruble determines how much currency market participants want to sell and how much they want to buy. Now this balance is distorted: anti-Russian sanctions affect imports to Russia much more than exports from it.

The Central Bank directly writes in its May report: when the movement of capital in the economy is limited, the exchange rate determines the balance of demand for currency from importers and supply from exporters. This “largely” explains the strengthening of the ruble, analysts of the Central Bank write.

About a thousand foreign companies have already left the Russian market (for settlements with which currency is needed), calculated at Yale University. And the rejection of Russian energy resources (which are paid for in foreign currency) in the EU is going poorly.

As a result, the supply of currency has not changed or even increased, because energy prices have risen, economists Oleg Itskhoki (professor at the University of California) and Dmitry Mukhin (professor at the LSE) write . And demand has fallen.

It is difficult to describe the situation with imports and exports with exact data, because since the beginning of the war, the Russian authorities began to hide economic statistics. The Federal Customs Service (FCS) stopped publishing data on exports and imports in January, the Central Bank – on foreign trade in goods, and the Eurasian Economic Commission does not publish data either. All three departments last reported on the results of January.

The Central Bank estimates that this year exports will be reduced by a maximum of 21%, and imports – by 36.5%. As a result, the difference between exports and imports will become larger than before.

This forms what analysts call the “overhang” of the currency. This is the main reason for the strengthening of the ruble, writes Egor Zhilnikov, chief analyst at the Economic and Industry Analysis Department of the PSB.

The drop in imports – which is indicated both by the situation on the foreign exchange market and by economists, both Russian and foreign – is a very serious symptom. It reports on the state of the Russian economy more than the exchange rate of the ruble. Imports are falling because Russians buy less foreign goods and use them less in production. While it is felt weakly: there are reserves. But over time, this will lead to a drop in production and a decrease in the well-being of Russians, write Itskhoki and Mukhin.

In a nutshell: the fact that imports are falling confirms that sanctions against Russia are working.

You can’t sell rubles that easily . Demand is under pressure from the fact that since the beginning of the war in Russia there have been severe restrictions on the movement of capital. Some of them were canceled when the market calmed down a little – a month after the start of the war. The rest are still active.

Exporters must change the proceeds in foreign currency into rubles. Since February 28, the Central Bank has obliged all exporters to change 80% of the foreign currency received from buyers for Russian. The requirement affected not only oil and gas suppliers, but everyone who sells something abroad (including services).

The requirement was formulated as strictly as possible: it affected all revenue from the first of January. And new tranches of exporters were obliged to sell a maximum of three days after receipt (later, for non-primary companies, this period was extended to three months).

The largest exporters used to sell about 77% of their revenue in order to pay salaries and taxes in rubles, a representative of the Central Bank told Vedomosti. But it was about the main exporters, and these sales were “smeared” throughout the year.

If we count according to data for 2021, 80% of export revenue is about $1.6 billion a day, BCS analysts argue . This is more than half of the average turnover of trading in the dollar (USD/RUB pair) on the Moscow Exchange. It is $ 2.9 billion. Now it has come to the point that exporters in good faith tried to sell the currency on the market, but could not : there was no demand.

Just a couple of days ago, the norm was softened: exporters were allowed not to sell as much currency as they need under import contracts (that is, to pay for the services of foreigners or buy something from them). Many people have such contracts, but there are no cases when their volume is close to 80%, Associate Professor of the Department of World Financial Markets and Fintech of the Russian University of Economics named after Vedomosti told Vedomosti. G. V. Plekhanova Tatyana Belyanchikova.

The further fate of the ruble will depend on how quickly the authorities will remove restrictions on foreign exchange transactions and how imports will be restored, analysts whose forecasts have been studied by the BBC agree.

In the near future, the ruble may stay at the level of 55-60 rubles per dollar, Loko-Invest economist Dmitry Polevoy believes. Economists from Renaissance Capital and PSB also expect a rate closer to 60 rubles per dollar in the next two months.

Then the ruble will gradually weaken, admits Romanchuk. Even according to the official forecast of the Ministry of Economic Development, the dollar will cost 76.4 rubles by the end of the year, and the euro – 82.5 rubles.

The dollar and the euro at 60-65 have two minuses. First, they cannot be bought at this rate. Secondly, such a course is unprofitable for many exporters and the Russian budget.

A few years ago, Vedomosti calculated that at prices for 2017, the production of petroleum products goes “to zero” at a dollar of 65.3 rubles (further losses), mining – at a dollar for 54.1 rubles, wood processing – at a dollar for 57.7 rubles.

The Russian budget, in turn, is drawn up with an eye to the cost of energy resources and the dollar to ruble exchange rate. The budget for 2022 has been reduced based on the fact that the dollar will cost 72 rubles (now 10 rubles cheaper), and a barrel of Urals oil will cost 44.2 dollars (the price for it from April 15 to May 14 was an average of $73.24 ).

So far, there are no problems: a strong ruble is compensated by the high price of oil. But if Europe refuses Russian oil, as it plans, and imports in Russia remain at the current level, they will appear.