As of March 16th 2015 RUSSIA - RUSSIAN RUBLE, RUB Country: Russia Currency: Russian Ruble (RUB) Phonetic Spelling: {ru:bil} Country Overview Abbreviation: RUB FOREIGN EXCHANGE Controlled by the Central Bank of Russia (http://www.cbr.ru/eng/) The RUB continues Etymology to be affected by the oil price shock, escalating capital outflows, and damaging The origin of the word “rouble” is derived from the economic sanctions. The Russian ruble (RUB) continued to extend its losses and Russian verb руби́ть (rubit’), which means “to chop, cut, suffered its largest one-day decline on Dec 1st against the US dollar (USD) — less than to hack.” Historically, “ruble” was a piece of a certain a month after allowing the RUB to float freely. The RUB’s slide reflects the fact that weight chopped off a silver oblong block, hence the Russia is among the most exposed to falling oil prices and is particularly vulnerable to name. Another version of the word’s origin comes from the Russian noun рубец, rubets, which translates OPEC’s recent decision to maintain its supply target of 30-million-barrels per day. This to the seam that is left around the coin after casting, combined with the adverse impact of Western sanctions has contributed to the RUB’s therefore, the word ruble means “a cast with a seam” nearly 40% depreciation vis-à-vis the USD since the start of 2014. In this context, the Russian Central Bank will likely hike interest rates at its next meeting on December In English, both the spellings “ruble” and “rouble” are 11th. RUB is forecast to close the year at around 53.2 in 2014 and 50.9 in 2015. used. The “rouble” is preferred by the Oxford English Dictionary, but the earliest use recorded in the English language is the now obsolete “robble”. The “rouble” was In an effort to strengthen and stabilize the currency, the Russian government has derived from the transliteration into French used among placed efforts to put pressure on exporters to not hoard their foreign exchange the Tsarist aristocracy, and today, there are two main revenues, leading to positive effects for the Russian currency, which is down some usage tendencies: one in North America, the “ruble” and 45 percent against the U.S. currency this year. Also, the central bank has spent over the other for English speakers outside the US, the $80 billion defending the currency so far this year amid a collapse in oil prices and “rouble”. Neither tendency is absolutely consistent. Western sanctions over Ukraine that have dented investors’ appetite for Russian risk. Currency History SOVEREIGN DEBT The Ruble has been the official currency of Russia for nearly 500 years. The kopek was first introduced in 1710, Toward the end of 2014, the Russian economy experienced a sizeable deterioration with a value of 1/100th of a Ruble. due to a rapid fall in oil prices, a sharp depreciation of the ruble, high interest rates and the impact of Western sanctions. Recent data suggest that economic conditions In December, 1885, the Russian Ruble was revalued have grown considerably worse in the outset of 2015. In order to protect key sectors to a gold standard and pegged to the French Franc at of the economy and to provide a cushion against a potential economic collapse, the 1 Ruble = 4 Francs. This value was revised in 1897 to government announced an anti-crisis plan in January. The plan will be financed by 1 Ruble = 2 2/3 Francs. During World War I, the gold standard was dropped leading to devaluation of the the National Wealth Fund. In spite of the announcement, ratings agencies Standard Ruble and hyperinflation. With the outbreak of World & Poor’s and Moody’s both cut Russia’s sovereign credit rating to junk status on 26 War I, the gold standard peg was dropped and the ruble January and 20 February, respectively, citing the conflict in Ukraine, low oil prices and fell in value, suffering from hyperinflation in the early the slide of the ruble. 1920s. With the founding of the Soviet Union in 1922, GROWTH OUTLOOK the Russian ruble was replaced by the Soviet ruble. The Given Russian’s current political and economic turmoil, there have been active “second Ruble” was introduced in 1922, followed by the attempts to ease inflationary pressures. Russia’s outlook is dimming against a “third Ruble” in January 1923. The “fourth Ruble” also backdrop of rapidly worsening economic conditions and the possibility of even known as the “Gold Ruble” was issued in March, 1924. Following World War II, the “fifth Ruble” was introduced stronger international sanctions. Recently, the U.S. government and European leaders in order to revalue the currency and reduce the amount discussed deeper sanctions against Russia should the ceasefire in Ukraine be violated of paper notes in circulation. The introduction of the further. Some analysts see the potential for the Russian economy to approach near “sixth Ruble” occurred in 1967 and remained the official collapse this year. They cut their 2015 GDP growth forecasts from the 4.1% contraction currency of Russia during the transition from the Soviet expected last month to the current 4.2% decrease. For 2016, economic growth is Union to the modern Russian Federation, though new expected to reach a timid 0.5%. notes were issued in 1993 to reflect the change. The “seventh Ruble” was issued on January 1, 1998, The weak ruble, however, continues to lend support to exports, while a temporary essentially devaluing the Russian Ruble at a rate of 1 new agreement between Russia and the Ukraine to end its long-standing gas dispute has Ruble = 1,000 old Rubles. The ruble was redenominated been reached. Nevertheless, unsolved issues will resurface in 2015, while weaker oil on 1 January 1998, with one new ruble equaling 1,000 old prices and sanctions will likely remain in place for the foreseeable future. rubles. The redenomination was a purely psychological step that did not solve the fundamental economic INFLATION problems faced by the Russian economy at the time, and Consumer prices increased 2.20% in February over the previous month, which came the currency was devalued in August 1998 following the 1998 Russian financial crisis. The ruble lost 70% of its in below the 3.90% rise observed in January. The result, which was on par with market value against the U.S. dollar in the six months following expectations, marked the slowest increase in consumer prices since November 2014. this financial crisis. The monthly increase continued to reflect a weak ruble and higher food prices as a result of the food imports’ restriction that the Russian government had imposed in early August in retaliation to the sanctions imposed on the country over the crisis in Ukraine. As a result of the monthly increase, annual inflation climbed from 15.0% in January to 16.7% in February, which marked the highest level since March 2002. Inflation in Russia has been fuelled by the sharp weakening of the Russian ruble. At the current rate, inflation remains well above the Russian Central Bank’s 4.5% inflation target. Russia is likely to continue experiencing rising inflation in the coming months due to the Russian embargo on food imports from some Western countries. In addition, the ruble’s sharp depreciation will continue having a significant impact on inflation and inflation expectation in the first half of 2015. GOVERNMENT The Government of the Russian Federation exercises executive power in the Russian Federation. The members of the government are the Prime Minister of Russia (Chairman of the Government), the deputy prime ministers, and the federal ministers. It has its legal basis in the Constitution of the Russian Federation and the federal constitutional law “On the Government of the Russian Federation. Led by current PM Dmitry Medvedev, the country is currently faced with sanctions lead by Western powers and the U.S, coupled with the crisis in Ukraine, which all remain central to the Russian political environment in the near-term. While the intensified Ukraine- Russia crisis is far from being settled, the current fall of the rubble and coinciding fall in oil prices, have led global market participants to react adversely to Russia’s immediate economic outlook. Financial market metrics (as measured by equity, debt and currency indicators) now point to a prolonged state of escalation of the current geopolitical crisis. FINANCIAL SECTOR As of December 2014, exports totaled USD 34.5 billion, which represented a 30.2% decrease compared to the same month of the previous year. The marked the fifth consecutive month of contraction and the sharpest decrease since September 2009. As a result of the deterioration in exports’ growth, the trade surplus totaled USD 9.9 billion in December, which was smaller than the USD 17.0 billion observed in the same month of the previous year. In the full year 2014, the trade surplus totaled USD 186 billion, which came in slightly above the USD 182 billion surplus tallied in 2013. Global oil prices have fallen sharply over the past seven months, having a significant impact on the price for Ural oil, which is Russia’s key export commodity. On 30 January, the Ural oil barrel traded at USD 47.6, which was 10.7% lower than the same day of the previous month. Compared to January 2014, the price of Ural oil lost more than half of its value. According to the World Bank, Russia loses about USD 2.0 billion in revenues for every dollar drop in the oil price. Despite expectations that oil prices will remain low this year, Russian authorities had confirmed that the country would not reduce oil output.