A declining value of Russia's currency could impact President Vladimir Putin's war effort against Ukraine.
The ruble weakened to 114 against the U.S. dollar on Wednesday, hitting its lowest level since March 2022, shortly after Putin's forces invaded Ukraine, CNBC reported.
Russian currency was bouncing back a bit on Friday, when the official central bank rate was set at 109 to the U.S. dollar, meaning the ruble is worth less than a penny in dollar terms.
There have been similar declines against the Chinese yuan, which has largely replaced dollars and euros for foreign trade after sanctions imposed by Ukraine's Western allies cut Russia off from most dealings with Western companies and banks.
Some analysts and economists attribute the ruble's weakening in part to rising geopolitical tensions since Western nations allowed Ukraine to fire their long-range missiles deeper into Russian territory last week, and Russia replied by firing a new missile at Ukraine.
Some experts say new U.S. sanctions last week on Gazprombank, a large privately owned Russian bank, also were a factor. The sanctions could cause a further decrease in revenues from gas.
The bank previously had been spared American punishment due to its role as a conduit for Russian gas payments.
Putin and other officials have sought to spread calm through Russian financial markets since the ruble's fall.
However, a weakened ruble could affect Russia's ability to finance its war against Ukraine.
"Russia is already under pressure to maintain extremely high levels of military expenditure, and the devaluation of the ruble may potentially further strain its capacity to continue financing its war in Ukraine," Patrick McGovern, an associate at geopolitical and cyber risk consultancy S-RM, told Newsweek.
McGovern added that the most significant impact "may be the need to redirect other federal budget resources to continue financing the war, which may lead to a degradation in public services and create the conditions for social disquiet in the long term.”
"Imports of critical goods [such as] circuits, microchips, for military purposes will become more expensive," Vasily Astrov, an expert on the Russian economy with the Vienna Institute for International Economic Studies, told Newsweek.
"But overall inflation will rise further, and this will eat into the real incomes of the population, so that private consumption — the main driver of economic growth — will suffer somewhat as a result."
Reuters contributed to this report.
Charlie McCarthy ✉
Charlie McCarthy, a writer/editor at Newsmax, has nearly 40 years of experience covering news, sports, and politics.
© 2024 Newsmax. All rights reserved.