Over the past 12 months, the euro and the English pound strengthened by 9% against the American dollar. Ruble during the same time lost 11%. Despite the increase in the number of dollars by 25% last year and the restoration of the cost of oil, the Russian currency continues to take positions. Now it's forever?
Russia is an export-oriented country. This makes it dependent on both prices for resources and from relationships with international partners. On the example of Iran, it can be seen that the last aspect is more significant: the country due to American sanctions lost most of the oil clients (India, Turkey, South Korea, etc.).
According to the official position, the income from the sale of oil and gas form about 45% of the budget of the Russian Federation. These energy resources restored the cost before 2019 levels, but the ruble did not repeat their movement.
The fact is that not only prices have decreased, but also sales. In 2020, they sold 238.6 million tons of crude oil, which is 11.4% less than a year earlier. Revenue has collapsed by 41%. World oil consumption restrain the continuing pandemic and low level of flights. Compared to 2019, the global demand for passenger air transportation fell by 66%, and vaccination around the world passes much more slowly forecasts. Also risks are strengthened due to the mutation of the coronavirus and the emergence of new strains.
A little better situation is the situation with natural gas - the fall in world consumption is within 3-4%, and the appearance of a new gas branch with a capacity of 55 billion m3 per year will provide the country with additional income. However, the completion of the construction of "Northern Flow-2" is under threat due to new sanctions. The same sanctions change the investment climate not for the better.
Over the past two years, the number open by foreigners firms has been reduced by the Twill, according to the EGRUL.
Failing foreign firms to cooperate with Russia leads to a drop in foreign direct investment.
The last aggravation of foreign policy relations is associated with the arrest of Alexei Navalny. The leading Western countries spoke in favor of his immediate liberation, and the ECHR sent a number of ultimatic issues to Russia. The lack of a compromise solution will lead to a new twist of sanctions, which will include a ban on cooperation with a number of individuals and organizations.
The most painful can be a ban on the conduct of a gas pipeline in a number of countries. The heads of the Ministry of Foreign Affairs of Poland and Ukraine wrote a letter to Joe Bidenu asking any means to prevent the end of the project.
The economy remains too dependent on Western partners, and the GDP per capita is near the level of 2008 ($ 12 thousand). The fall in investment attractiveness leads to a decrease in demand for Russian currency, and due to sanctions it is impossible to purchase the necessary capital-intensive equipment (for example, the supply of Siemens turbines for the Crimean TPP). All this harms the Russian economy in the long run and causes the ruble fall, despite the restoration of energy prices.
And how do you think, have the ruble chances of strengthening? Write about it in the comments!
Analytical group Forex Club - Partner of Alfa Forex in Russia
Read Original Articles on: Investing.com