Chapter 1: The Unexpected Recovery of the Ruble

Against all expectations, the ruble has appeared to regain its value after the onset of Russia's invasion of Ukraine. But how did this happen? Does this suggest that the sanctions imposed on Russia have been ineffective? The answer is complex; while the sanctions have not achieved the desired devastating impact, their effects have been less severe than anticipated.

The ruble's resurgence can largely be attributed to two main factors: stringent capital controls and Russia's insistence on receiving payments for oil and gas in rubles. These measures have created an artificial demand for the currency, even as Western nations largely exclude themselves from ruble-denominated transactions.

Russia has enforced strict limitations on capital outflows for both foreigners and its citizens. There are tight restrictions on how much foreign currency residents can buy and withdraw from their bank accounts. Moreover, exporting companies are mandated to convert 80% of their foreign currency earnings into rubles. This, combined with the exclusion of Western businesses from the ruble market, has led to a scarcity of rubles, further inflating its value. Additionally, the doubling of interest rates on ruble deposits has bolstered the currency's standing.

However, this strength seems to be heavily influenced by manipulation. Reports indicate that the ruble often trades below the official rate when individuals attempt to exchange it. When a market is tightly controlled and lacks liquidity, it becomes simpler to inflate prices. For instance, if short selling of a stock were prohibited while many institutions were forced to acquire that stock, its price would rise regardless of its real economic value.

While the ruble has bounced back, Russia's stock market—a more accurate reflection of the nation's medium-term economic outlook—remains near its lowest point. Elevated interest rates and the withdrawal of foreign businesses, along with restricted access to international markets for many of Russia's non-commodity sectors, are leading to an economic downturn that is likely to increase unemployment. Simultaneously, the inability to import goods from many countries is causing inflation, making it challenging for Russia to lower interest rates to stimulate its economy. A period of stagflation appears to be the most probable outcome for Russia.

The first video titled "RUSSIA Starts to Collapse" delves into the implications of the ruble's recovery amidst ongoing sanctions and economic challenges facing Russia.

Chapter 2: The Global Impact of Russian Energy Exports

The primary reason for the relative stability of Russia's economy is the ongoing demand for its oil and natural gas. Despite being under sanctions, countries like Germany find themselves reliant on Russian energy. This paradox highlights how nations can simultaneously restrict Russia's finances while still purchasing its resources.

Countries that have chosen to remain neutral or pro-Russia, such as India and China, are benefiting from the lower energy prices that Russia offers. They view these discounted rates as an opportunity to stockpile resources during a time of global inflation.

However, the downside for Russia is that it is selling its energy exports at reduced prices due to the conflict. This, in turn, means that its economy—where exports account for approximately 28% of GDP—will inevitably contract as it both sells less and receives lower prices per unit.

Looking ahead, Russia's decisions regarding interest rate adjustments will be crucial. Recently, the country lowered rates from 19% to 17% due to the ruble's recovery. High interest rates, while making the currency more attractive to hold, can also slow economic growth. If Russia lowers rates to invigorate its economy, it risks exacerbating inflationary pressures and creating a backlog of demand to short the currency, which would remain suppressed until capital controls are eased. This could result in a negative cycle where fears of currency depreciation prolong capital controls, making Russian assets less appealing to investors and further pressuring the ruble.

Although this cycle may not lead to a complete economic collapse, it could severely hinder Russia's long-term capacity to attract talent and investment.

Lastly, it's essential to address the humanitarian impact of the ongoing conflict. The actions of the Russian military in Ukraine are indefensible, and the suffering of ordinary Russian citizens cannot be compared to the hardships faced by those in Ukrainian cities like Mariupol. Despite the manipulated rebound of the ruble, it indicates that the sanctions imposed on Russia must intensify to effectively address the ongoing tragedy and prevent future conflicts.

The second video titled "RUSSIAN Ruble Dead as a Global Currency" examines the broader implications of the ruble's status in the international market and the economic challenges facing Russia.