Russian ruble tumbles as oil prices crash

MOSCOW (AFP) – The Russian ruble tumbled yesterday to a four-year low amid a crash in oil prices as authorities rushed to assure the public the country has accumulated enough funds to withstand the blow.

The ruble fell by nine per cent to trade at 75 to the United States (US) dollar, a rate last seen in early 2016. The Russian Central Bank and the Finance Ministry yesterday announced measures that aim to stabilise the ruble and ensure financial stability.

Russians have been chafing under multiple rounds of Western sanctions since Moscow annexed Crimea from Ukraine in 2014 and tumbling oil prices may deal a new blow to the country’s economy and President Vladimir Putin’s already flagging approval ratings.

Saudi Arabia launched an all-out oil price war last Sunday with the biggest cut in its prices in the past 20 years, after OPEC and Moscow failed to clinch a deal to reduce output.

A meeting of main producers was expected on Friday to agree to deeper cuts to counter the impact of the coronavirus but Russia refused to tighten supply.

A Russian ruble coin is pictured in front of St Basil cathedral in central Moscow on November 20, 2014. PHOTO: AFP

In response, Riyadh slashed its price for April delivery by USD4-6 a barrel to Asia and USD7 to the US.

Yesterday, Russia’s central bank said it was halting foreign currency purchases for the next 30 days.

“This decision has been taken to increase the predictability of actions of monetary authorities under the conditions of significant changes on global oil markets.”

The central bank said it would continue monitoring the situation and was ready to use “additional instruments in order to maintain financial stability”.

The Finance Ministry said for its part it would be selling foreign currencies in the open market if oil prices continue to fall, adding this will have “a stabilising effect on the national currency exchange rate”.

The ministry said Russia has accumulated enough money to withstand low oil prices.

As of March 1, the National Wealth Fund was worth USD150 billion, or 9.2 per cent of gross domestic product, the ministry said in a statement.

That will be enough to last six to 10 years if oil prices fall to USD25-30, it said.

Russia has entered a politically sensitive period after Putin in January proposed an overhaul of the constitution, the first changes to the basic law since 1993.

A vote on the controversial reforms that Putin said should ensure the country’s future for decades to come is set for April 22, followed by parliamentary elections next year.

Analysts say that the weak ruble may jeopardise Putin’s promise to invest tens of trillions of rubles in Russia’s dilapidated infrastructure and other sectors over the next five years in a bid to kickstart anaemic economic growth.

Putin has earmarked RUB25.7 trillion for investment in virtually all sectors – digitalisation, demographics, ecology, education, roads, culture and health – from now until the end of his fourth Kremlin term in 2024.