Russia’s currency rouble hit its lowest level since April last year on Thursday after reports suggested that British oil giant Shell may repatriate over $1 billion from the sanctions-hit country.
The rouble closed at 81.6 per dollar on Thursday, the lowest since April 2022.
Reports suggest that Russian President Vladimir Putin has allowed Shell to sell its stake, worth $1.21 billion, in a project in the Russian Far East. Shell moved out of Russia after Moscow invaded Ukraine last year.
Since the war began in Ukraine in February 2022, Putin has asked foreign companies to seek permission before selling their Russian assets.
The British oil giant is not the only company to withdraw from Russia, which has been under multiple sanctions after the invasion. These sanctions have effectively cut Russia’s global financial and payment systems access.
According to a Bloomberg report, assets worth 15 to 20 billion dollars have flown out of Russia, putting immense pressure on its economy.
The flight of capital from Russia has hurt the stability of the rouble.
“With liquidity in the currency market low, it leads to increased volatility for the rouble,” Dmitry Polevoy of Moscow’s Locko-Invest told Bloomberg.
Indeed, the rouble has had a volatile journey since the Ukraine war. The Russian currency rose from 78 to over 130 per dollar when Moscow invaded its neighbour.
However, by mid-2022, it recovered to 57 roubles per dollar. This was the best exchange rate in about four years.
The currency volatility, however, does not bode well for the Russian economy. After denying it for several months, Putin admitted that sanctions could impact Russia in the medium term.
“The illegitimate restrictions imposed may indeed have a negative impact on it in the medium term,” the Russian state media quoted him as saying.
WATCH | Capital outflows weigh on the Russia rouble
Reports in the Russian media suggest that sanctions have led to the budget deficit in the first two months of 2023 reaching 88 per cent.
A higher budget deficit means that Moscow needs help to fund its coffers.
According to the International Energy Agency, Russia earned $11.6 billion from its oil exports in February 2023, a 42 per cent drop from $20 billion in February 2022.
The drop in revenue comes after the European Union imposed a ban on Russian oil and a price cap was imposed by G7 countries and Australia.
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