Economist Vitaly Shapran says Putin has given Russia a full-blown crisis by declaring that Russia is ready to do without hostile currencies. As a result, while the Kremlin is successfully filling the budget, in reality it has huge problems.
The latest crisis in the foreign exchange market in the Russian Federation was presented to the Russians by Putin, who also advertised the US dollar.
If you take the statistics for 2023, then in the first half of 2023 the balance of payments surplus of the Russian Federation decreased by 68%, but it was still “+”. However, upon closer inspection it turned out to be a plus, not a plus. They experienced an imbalance in export and import payments in rubles (and other national currencies such as rupees, drachmas, etc.) and in the foreign currency of “countries hostile to the Russian Federation”. According to the results of the calculations made in June 2023, it is seen that the trade balance of the Russian Federation gave a surplus: exports exceeded imports by 4.9 billion dollars. However, when you expand exports by currencies, it turns out that there was a deficit of 0.174 billion dollars in the calculations made in dollars and euros for exports and imports in June, and the surplus consisted entirely of swaps in rubles and other national currencies. There are also problems with trade with India, because the Russian Federation cannot exchange the received rupees for dollars, and outside India you can not buy anything for them, so these rupees remained on paper, that is, they just hung in Indian banks.
Let me remind you that it was Putin who demanded that the Russian Federation leave the settlements with “damn dollars”. This situation leads to imbalances in dollar-ruble and euro-ruble markets when the trade balance gives a surplus and the currency (foreign exchange) is not sufficient. Added to this problem is the outflow of capital from the Russian Federation and the growth of the budget deficit, provided that the Russian government’s sources of external borrowing are not available.
It is interesting to observe that while all market participants know who is responsible for the instability in the Russian Federation, everyone remains silent. I also remember how we (some of our bloggers) panicked when Putin insisted on settlements in rubles and local currencies, and someone even considered it a strong move. It was actually a very stupid move because Russian exporters stockpiled local currencies that they could not withdraw from the countries they exported to. And this is because exports and imports between two particular countries almost never equal 0, thus guaranteeing the imbalance in the calculations. Therefore, currencies such as the US dollar, euro, yen and pound are used for international payments.
In fact, the best advertisement for the US dollar and reserve currency group was unimaginable. Now, the whole world has seen what happened with the effect of the localization of trade and the break from the World Market. While the Russians pretend that everything is fine, Putin himself is hiding from this issue, shifting the problems to the Central Bank, that is, to ordinary Russians, who, after the Central Bank’s decision, immediately start raising mortgage rates.
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Source: Focus
John Holton is a seasoned author and journalist, known for his expertise in economics. He currently works as a writer at 24 news breaker, where he provides readers with in-depth analysis and commentary on the latest economic developments. With a background in finance and a talent for explaining complex economic concepts in a clear and accessible way, John’s writing is a must-read for anyone interested in staying informed about the economy.