Russia’s ruble is at strongest level in 7 years despite sanctions

Russia’s ruble hit 52.3 to the dollar on Wednesday, an increase of roughly 1.3% on the previous day and its strongest level since May 2015.

That’s a world away from its plunge to 139 to the dollar in early March, when the U.S. and European Union started rolling out unprecedented sanctions on Moscow in response to its invasion of Ukraine. 

The ruble’s stunning surge in the following months has given fuel to the Kremlin as “proof” that Western sanctions aren’t working. 

“The idea was clear: crush the Russian economy violently,” Russian President Vladimir Putin said last week during the annual St. Petersburg International Economic Forum. “They did not succeed. Obviously, that didn’t happen.”

In late February, following the ruble’s initial tumble and four days after its invasion of Ukraine began on Feb 24., Russia more than doubled the country’s key interest rate to a whopping 20% from a prior 9.5%. Since then, the currency’s value has improved to the point that it’s lowered the interest rate three times to reach 11% in late May.

The ruble has actually gotten so strong that Russia’s central bank is actively taking measures to try to weaken it, fearing that this will make their exports less competitive. 

But what’s really behind the currency’s rise, and can it be sustained? 

The reasons are, to put it simply: strikingly high energy prices, capital controls and sanctions themselves. 

Russia is the world’s largest exporter of gas and the second-largest exporter of oil. Its primary customer? The European Union, which has been buying billions of dollars worth of Russian energy per week while simultaneously trying to punish it with sanctions. 

That’s put the EU in an awkward spot – it has now sent exponentially more money to Russia in oil, gas and coal purchases than it has sent Ukraine in aid, which has helped fill the Kremlin’s war chest. And with Brent crude prices 60% higher than they were this time last year, even though many Western countries have curbed their Russian oil buying, Moscow is still making a record profit. 

In the Russia-Ukraine war’s first 100 days, the Russian Federation raked in $98 billion in revenue from fossil fuel exports, according to the Centre for Research on Energy and Clean Air, a research organization based in Finland. More than half of those earnings came from the EU, at about $60 billion.

And while many EU countries are intent on cutting their reliance on…