As of December 15th 2014 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, Current turmoil aside, the Russian Federation still maintains a current account with a value of 1/100th of a Ruble. surplus and a solid credit position despite heightened tensions linked to sanctions affecting the normal flow of securities and payment markets. However, this is In December, 1885, the Russian Ruble was revalued expected to change and drop – potentially significantly given the current economic to a gold standard and pegged to the French Franc at climate, in 2015. Irrespective of market trends, all rating agencies maintain a 1 Ruble = 4 Francs. This value was revised in 1897 to “negative” outlook on Russian country ratings; Standard & Poor’s lowered Russia’s 1 Ruble = 2 2/3 Francs. During World War I, the gold standard was dropped leading to devaluation of the credit rating one notch to “BBB-” and the facing uncertainty will undoubtedly Ruble and hyperinflation. With the outbreak of World continue to create adverse and deteriorating effects. War I, the gold standard peg was dropped and the ruble fell in value, suffering from hyperinflation in the early 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. The central bank unexpectedly increased “third Ruble” in January 1923. The “fourth Ruble” also interest rates by 150 basis points at its meeting this past October, bringing its key rate known as the “Gold Ruble” was issued in March, 1924. Following World War II, the “fifth Ruble” was introduced to 9.5%. Amid monetary tightening and modest real wage growth, consumer spending in order to revalue the currency and reduce the amount has slumped, while business confidence and investment have been hit hard by the of paper notes in circulation. The introduction of the sharp rise in financing costs and the threat of harsher international sanctions. In this “sixth Ruble” occurred in 1967 and remained the official context, the sharp decline in oil prices has exacerbated the likelihood that the Russian currency of Russia during the transition from the Soviet economy will fall into recession over the next year at a time when government finances Union to the modern Russian Federation, though new are strained by less revenue from oil and gas taxes, rising defense expenditure, and notes were issued in 1993 to reflect the change. growing pension liabilities. The weak ruble, however, continues to lend support The “seventh Ruble” was issued on January 1, 1998, to exports, while a temporary agreement between Russia and the Ukraine to end essentially devaluing the Russian Ruble at a rate of 1 new its long-standing gas dispute has been reached. Nevertheless, unsolved issues will Ruble = 1,000 old Rubles. The ruble was redenominated resurface in 2015, while weaker oil prices and sanctions will likely remain in place for on 1 January 1998, with one new ruble equaling 1,000 old the foreseeable future. It should be noted, the central bank has spent over $80 billion rubles. The redenomination was a purely psychological defending the currency so far this year amid a collapse in oil prices and Western step that did not solve the fundamental economic problems faced by the Russian economy at the time, and sanctions over Ukraine that have dented investors’ appetite for Russian risk. the currency was devalued in August 1998 following the 1998 Russian financial crisis. The ruble lost 70% of its INFLATION value against the U.S. dollar in the six months following The inflation rate in Russia accelerated to 9.10 percent in November of 2014 from this financial crisis. 8.3 percent reported a month earlier. It is the highest rate in 3 years. With the recent plunge in the ruble consumers in Moscow have been on a spending spree, due to fears of price hikes, particularly after a massive interest rate increase failed to stop the ruble’s decline. Though the ruble has been able to regain some ground, forecasters and investors remain nervous about currency’s stability. In effort to stabilize the conditions, Russia’s central bank spent billions of dollars this week propping up the ruble after a jump to a17 percent interest rate failed to arrest its decline. 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 Russia’s total GDP was worth $2096.78 billion in 2013, reaching an all time high and represented 3.38% of the world economy. However, the Russian economy has been staggering every since, particularly as of late, with heightened geopolitical tension and Western sanctions, both continue to weigh heavily on economic activity and sentiment in Russia, while rapid capital flight and declining oil prices have also put significant pressure on economic accounts and markers, and most notably the ruble. This, combined with rising food prices, has been responsible for the acceleration in consumer price inflation to a three-year high of 8.3% y/y in October, up from 8% in September and well above the Russian central bank’s 5% target for end-2014. However, it should be noted that the central bank has spent over $80 billion defending the currency so far this year amid a collapse in oil prices and Western sanctions over Ukraine that have dented investors’ appetite for Russian risk. [email protected] Full disclaimer: This Executive Summary is the property of Dartmouth Capital, LLC d.b.a. SafeDinar.com and is therefore the intellec- tual property of Dartmouth Capital, LLC d.b.a. SafeDinar.com. All rights reserved. This report and publications discussed are intended 877 723 3391 solely for information purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or sell or trade in any commodities, securities, or currencies herein named. Information is obtained from sources be- lieved to be reliable, but is in no way guaranteed.