Image Credit: AP
The economic and military sanctions by the West flushed down the Russian economy just after Moscow announced a "special military operation" against Ukraine, which led to a catastrophic collapse of the ruble (₽). Data suggested that the exchange rate of the Ruble against one US Dollar fell from 78 to 138.
It's been over a year since the war started, with no end in sight. The sanctions from the EU and US allies have tightened, intending to choke the Russian economy; however, the opposite happened. Russia's foreign reserves have surged over $600 billion, with the reserves closing at $600.8 billion, as per data from the Bank of Russia.
This came against the rise of $6.9 billion, an approximately 1.2 per cent increase in the volume of reserves following "a positive market revaluation." Nearly 60 per cent of Russia’s US $643 billion international reserves were frozen following the invasion. The sanctions hit the supply chain and operations globally, causing the Ruble to fall severely against the US Dollar. This severely cut off Russian banks from the use of their assets and strengthen the falling Ruble.
However, the reserve holding is still lower than the record high of $643.2 billion recorded on February 18. The Russian Finance Ministry is positive that the Russian currency will stand strong against the sanctions. The Special Drawing Rights (SDR) within the IMF, foreign currency, and gold holdings make up Russia's foreign exchange reserves.
The formation of an investment fund employing frozen Russian public and private assets and the use of the proceeds for the post-conflict reconstruction of Ukraine were prior suggestions made by European Commission President Ursula von der Leyen.
Moscow has warned that the freeze of its assets violates international law and has branded it "theft" on numerous occasions. According to the Kremlin, the use of the US Dollar as a weapon in the sanctions campaign against Russia has discredited the fundamental concept of international reserves.
The US Dollar closed at almost 84 Ruble on 25th February, 2022 (a day after the announcement of the military operation) with the ruble taking a massive blow in the coming months with it reaching an all time high of 134 ₽ against one USD. However, data since June 2022 shows setting of a tangent that made the ₽ much stronger than the USD. It traded at 54 ₽ against the USD on 24 June, 2022 showing a strong comeback for the months that followed. It traded at 71 ₽ on 31 March, 2022 against the USD.