news

Russia’s economy is suffering under the weight of war and sanctions. So why is the ruble still one of the world’s strongest currencies?

Source: Meduza

The full-scale war remains a heavy burden on Russia’s economy. This year’s budget deficit will turn out to be roughly twice as large as authorities had expected, and will remain significant in the coming years. Because of the sanctions, the state is missing out on trillions of rubles. Ukrainian strikes on Russian oil refineries and other targets deep inside the country are also inflicting substantial damage. Nevertheless, the ruble has been strengthening against the dollar and the euro in recent months and has regularly ranked among the world’s strongest currencies in 2026. Why hasn’t it been affected by all these problems? Will the Republican defeat in the U.S. midterm congressional elections affect the ruble? And what will the exchange rate look like going forward?

What’s happening with the ruble’s exchange rate?

On October 29, the dollar fell below 80 rubles on the interbank market for the first time in two and a half months. It climbed back above that threshold by the end of the day and hasn’t dropped below 80 since. The official exchange rate for the U.S. dollar stood at 81.79 rubles on November 6.

Still, the dollar has weakened against the ruble by almost 5.5% since early September. The euro has weakened even more, dropping by almost 10 rubles over the same two months; its official exchange rate stood at 92.16 rubles on November 6.

And these aren’t even the lowest exchange rates of 2026: In late May, for example, the dollar fell below 71 rubles and the euro below 82. Those rates are close to prewar levels — the two currencies were last cheaper in 2021.

The exchange rate set by Russia’s central bank or the exchange can differ significantly from rates at currency exchange points, including both banking apps and physical exchange offices, where the dollar and euro can cost several rubles more than the official rates.

But why isn’t the ruble collapsing despite the economy’s problems?

In short, these problems currently aren’t among the priority factors affecting the exchange rate. The factors that drive the ruble’s movements fall into two categories: fundamental and current.

In October, the main factors favored the ruble’s strengthening. Businesses were buying rubles to pay quarterly taxes, and news emerged of negotiations among Russia, the United States, and Ukraine aimed at ending the war — another likely factor behind the ruble’s gains. That doesn’t mean investors necessarily believe the talks will succeed, but the exchange rate reflects the hope that accompanies every fresh attempt by Washington to push Moscow and Kyiv toward a compromise.

The situation changed in early November, when Republicans’ defeat in the midterm congressional elections weakened Donald Trump’s position and his prospects for brokering peace. Oil prices are also falling because of a reduced risk of escalation in the Middle East conflict, still an important current factor for the ruble.

None of these temporary conditions, however, is causing sharp swings in the exchange rate — a sign of how much Russia’s currency market has changed since before the war. Before 2022, any new sanctions or unfriendly rhetoric from Western leaders could trigger a sharp drop in the ruble.

There are simply fewer investors in the market now, since many of the foreign players who might have reacted strongly to the news have left the country. And the toughest sanctions have already been imposed: Russia’s financial system is cut off from the global one, so each new set of restrictions no longer shocks the economy or Russian businesses.

Fundamental factors, however, play a much bigger role.

And what are these factors?

The main one is the restructuring of all Russian trade that the war forced. Before 2022, dollars and euros entered the country largely through oil and gas exports, while businesses created steady demand for currency: many foreign companies operated in Russia, and goods were imported not just from China but also from EU countries. Dollars and euros were constantly needed to pay for that trade.

The situation is different now. Russia still trades oil and gas, but mostly with Asian countries, and it’s still earning currency from that trade. The war in the Middle East helped the Kremlin in recent months by driving up commodity prices. Revenues would have been even higher if not for Ukrainian strikes on oil refineries, ports, and shadow fleet tankers, but Russia has still managed to earn money.

Imports haven’t fully recovered since 2022, and China has become Russia’s main trading partner, allowing settlements in yuan. As a result, Russia simply doesn’t need dollars and euros in the volumes it did before the war, creating a currency overhang that strengthens the ruble.

This balance has held roughly since mid-2022. Few factors could disrupt it — a collapse in commodity prices, effective secondary sanctions against buyers of Russian oil that would force them to abandon the trade, or a rise in imports.

In other words, the ruble remains strong, with no signs of weakening noticeably. That doesn’t contradict the fact that the economy faces serious problems in the war’s fifth year — the very factors keeping the ruble stable against the dollar and euro are, in essence, not positive ones. Weak imports are driving inflation and a decline in consumer demand, while dependence on Beijing risks subordinating the Russian economy to China’s.

High interest rates from Russia’s central bank also pull excess rubles out of the market. People are putting money into deposits, which helps strengthen the ruble. The central bank is using the rate to offset budget policy against its enormous military spending, and the public and businesses are paying the price as loans become too expensive.

Demand for currency is also shaped by various restrictions tied, one way or another, to the war and sanctions. Foreign players left Russia’s financial markets after the full-scale invasion began and no longer need to buy currency to move it abroad. Russia, meanwhile, doesn’t issue debt securities in euros or dollars, so demand for currency to service government and corporate debt has also fallen.

Russians are also traveling abroad less because of various restrictions, another factor reducing currency demand and strengthening the ruble.

And how much longer will the ruble stay strong?

Fundamental indicators are unlikely to change in the near term, an argument against the idea that Russia’s currency could fall sharply or that the dollar or euro could reach 100 rubles, unless there are some black swan events: poorly predictable events that would completely upend the economic or geopolitical situation.

Economist Dmitry Polevoy believes the ruble is unlikely to start falling before the end of the year. Macroeconomists polled by Russia’s central bank expect the dollar to average 80 rubles this year, suggesting it’s unlikely to depreciate significantly by year’s end. Alfa-Bank expects a slight decline, forecasting the dollar will rise to 85-87 rubles by the end of 2026.

The current factors affecting the ruble are already changing this week. The tax period has ended — the main deadline fell on October 28 — so businesses won’t be buying rubles.

The New Year holidays are also approaching, and imports usually rise in the months leading up to them.

On November 5, Russia’s Finance Ministry announced the volume of its planned currency purchases, which it makes when oil prices are high to replenish reserves under the budget rule. Starting December 4, it plans to buy 15.6 billion rubles worth of currency and gold per day, up from 12.7 billion previously — purchases that could weaken the ruble, though probably not significantly.

But if we look further into the future, can we say what will happen to the ruble in the coming years?

Making such forecasts is a fairly thankless task, since many unplanned events can occur over a long period that affect even the fundamental factors. These forecasts should be treated with skepticism — they tend to show the general direction of the exchange rate’s fluctuations rather than precise figures. Still, specific figures do appear in analysts’ reports.

Alfa-Bank, for example, believes the ruble will still weaken over the next 12 months, to as much as 90-91 rubles per dollar. The bank expects oil prices — and with them revenue from commodity sales — to fall while imports rise, shrinking the currency overhang and changing the fundamental factors.

The new budget also assumes the Finance Ministry will buy more currency for reserves, which would further weaken the ruble.

Economists polled by Russia’s central bank, however, aren’t forecasting such a sharp weakening — the dollar will average more than 90 rubles only in 2028 and 2029, according to that survey.

Russia’s Economic Development Ministry expects a similar scenario, with the ruble gradually weakening from an average of 79.5 rubles in 2026 to 87.4 in 2027 and 96 in 2029, apparently reflecting a gradual decline in oil prices.

A ruble that’s too strong isn’t beneficial for either the Russian budget or businesses, so authorities may be betting on a weaker currency. That doesn’t mean their long-term forecast will necessarily come true.