Russia’s ruble surges, but the rally masks deeper economic stress

Last year, Cryptopolitan reported that Russia’s currency won a race no one expected it to enter. The ruble has beaten every other major currency against the dollar so far this year, jumping 45% since early last year.

It’s now trading close to 78 per dollar, a level not seen since before Russia launched its full invasion of Ukraine nearly four years ago.

That’s the fastest annual rise for the ruble since at least 1994. But the rally isn’t built on strength. It’s a side effect of an economy struggling to plug financial holes.

Behind the scenes, the country’s wartime economy is running out of room. After a year of weak oil revenues, missed growth targets, and tighter sanctions, the government is scrambling to hold the line.

Officials slashed budget spending by 19% in December compared to the same month a year before, based on Bloomberg’s read of Finance Ministry data. Yearly spending was still up by 7%, but that’s a sharp slowdown from the 24% increase seen the year before.

Oil crash and sanctions hammer Russia’s revenue

Russia did meet its revised budget deficit target of 2.6% of GDP, with the final shortfall reaching 5.6 trillion rubles (about $71.6 billion). But that wasn’t the original plan. The budget had aimed for a gap of just 0.5% of GDP, before everything got wrecked by the lowest oil and gas revenue in five years.

A mix of falling global crude prices, steep discounts on Russian oil, and that pesky strong ruble caused energy revenue to crash 24% year-over-year. In December, after the U.S. slapped new sanctions on Rosneft PJSC and Lukoil PJSC, oil and gas income dropped 43% in just one month.

“We fully understand that we cannot rely on high levels of oil and gas revenues over the long term,” Finance Minister Anton Siluanov said in an interview with state television channel Rossiya 24 late last year.

Russia’s economic growth for the year likely landed below 1%, according to internal estimates, missing literally every single official forecast and falling drastically short of the 4.3% growth rate in 2024.

So even though this deficit isn’t the worst in recent memory, 2020 still holds the record at 3.8% of GDP; the situation now feels more fragile.

Borrowing is also a nightmare. The central bank’s key interest rate is now at 16%, way up from the 4.25% seen back then. With foreign investors mostly gone, raising money is harder and pricier.

Russia’s finance ministry boosts daily currency sales

To avoid a ruble collapse, Russia’s Finance Ministry is throwing more foreign currency into the market. Starting Friday, it’s bumping daily forex sales from 5.6 billion rubles to 12.8 billion rubles (about $164 million).

Add in the central bank’s sales, and a total of 17.42 billion rubles will be dumped every day between January 16 and February 5, up from 14.54 billion rubles daily before.

All told, the ministry plans to offload 192.1 billion rubles worth of foreign currency during that period. Last month, it only sold 123.4 billion. These sales are pulled from the National Wealth Fund, which is denominated in foreign currency, mostly Chinese yuan. The central bank buys and sells on behalf of the ministry to help keep the market stable.

The strategy worked in 2025, when a mix of high interest rates, forex sales, and weaker imports propped up the ruble. But analysts in the latest Reuters poll say the ruble could fall back to 96.7 per dollar over the next year.

The central bank had earlier said that: “Elevated inflation expectations may impede a sustainable slowdown in inflation. We will focus on how prices, as well as consumer and business expectations, react to the increase in VAT and tariffs.”

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