The Russian economy has begun to cool after several years of intense growth driven by the war. Oil prices remain far from their peak levels. And the European Union is imposing new sanctions against Russia. Nevertheless, the ruble seems to ignore all these factors. The exchange rate of the Russian currency is stable at 80 per dollar. Meduza explains where the ruble got its crown as the best currency of 2025 and how soon it might lose this status.
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What makes the ruble strong? And how does Trump’s factor help him?
Since the beginning of the year, the ruble has strengthened against the dollar by almost 40%. In terms of the rate of return, the Russian currency has almost literally become “more expensive than gold.” While the ruble has increased in value by 38% against the dollar in OTC trading, gold has increased by only 23% over the same period. The strengthening of the Russian currency was not hindered by the 20% increase in budget expenditures (the government spent 15.5 trillion rubles from January to April 2025, compared to 12.8 trillion rubles in the same period last year), nor by the slowdown in the growth rate of the Russian economy (according to Rosstat’s preliminary estimates, GDP growth was 1.4% in the first quarter of 2025, compared to 4.5% in the fourth quarter of 2024).
For the dollar at 80, a combination of several factors worked, but most importantly, none of them can be considered fundamental.
- Firstly, the factor of Donald Trump: the escalation of his trade wars has weakened the dollar, and the mere existence of negotiations between Washington and Moscow is fueling interest in Russian high-yield assets among foreign investors.
- Secondly, Russia has high interest rates (which cool down domestic demand for imports) and sanctions restrictions on capital outflows, and the government is ready to support the ruble by selling currency from its sovereign reserves, as it did in April when the budget lost 65.6 billion rubles in planned oil and gas revenues.
Compared to the beginning of the year, the ruble is 26% stronger against the dollar, despite a 12% decrease in the price of oil, according to an economist at a European bank. The main reason for the ruble’s success is the high expectations of potential benefits for Russia “from the public stance of the US presidential administration,” he believes. “Without this factor, the ruble exchange rate would be around 95 rubles per dollar instead of 80,” the expert said in an interview with Meduza. If you look at the failure of the attempt of a joint sanctions offensive against the Kremlin of Europe and the United States under Trump, the market is not so wrong — we will discuss this in more detail below.
In order to maintain the exchange rate at the current level (80 rubles per dollar) for a long time, according to the economist of the European bank, it is necessary to at least partially ease sanctions in order to increase exports and/or reduce capital outflow, he believes. Despite all the achievements of Russian diplomacy, this is out of the question right now.
When will the ruble weaken? And how does the current exchange rate affect prices?
- All other things being equal, the ruble will weaken by 10-15% by the end of the year (that is, to 88-92 rubles per dollar, — approx. “Medusa”) According to an economist from a Russian think tank, the drop in oil prices has not yet been fully reflected in the exchange rate.
- According to a senior Reuters source, the government is satisfied with a exchange rate of 100 rubles per dollar, as it will help compensate for the budget’s lost revenue due to lower export revenues caused by a strong currency, sanctions, and a decline in global oil prices.
- Goldman Sachs expects the dollar to reach 100 rubles this summer.
- Analysts surveyed by the Central Bank in April predicted a dollar exchange rate of 95.2 rubles per dollar in 2025.
- The Ministry of Economic Development expects the dollar exchange rate to reach 98.7 rubles by the end of the year.
The ruble is indeed overvalued, and a decline in oil prices could lead to its weakening, according to Dmitry Belousov, chief macroeconomist at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), which is close to the government. He believes that there is a risk of the ruble weakening excessively due to purely psychological factors.
In the meantime, the strengthening of the ruble has helped to slow down inflation: in April 2025, Rosstat estimated inflation at 0.4% after 0.65% in March, 0.81% in February, and 1.23% in January. According to the Central Bank of the Russian Federation, deflation has been observed in the “non-food goods without fruit and vegetable products” group for five consecutive weeks (−0.45% in total, of which −0.31% in the last three weeks), which has caused concern among analysts. “The combination of a sales crisis and deflation in non-food goods with an increase in interest payments, rent, and leasing fees for trade organizations, etc. could make trade a very serious crisis zone.” The main source of inflation is food and medicine, with almost a full-fledged increase in medicine (0.53% over three weeks).
“Inflation has been quite close to the target over the past month (if we look at the momentary metrics in annual terms), but the stability of this is largely based on a strong ruble and a relatively high interest rate, and all of this is not free, so I am more than confident that the key interest rate will be lowered in the summer,” an economist from a Russian think tank told Meduza. A cautious reduction cycle could begin as early as June, according to his colleague from a European bank. According to him, it will take several years for the rate to return to 10% in the optimistic scenario. At the last meeting in April, the Central Bank did not decide to ease its policy and kept the key interest rate at an all-time high of 21% for the fourth consecutive time. Lowering the key interest rate will support the cooling economy, but it will put pressure on the ruble and contribute to its weakening.
Are the new sanctions dangerous for the ruble? And does the West still have leverage over Russia?
The new 17th package of EU sanctions is being imposed under pressure from Hungary, which still buysRussia’s pipeline gas and oil (which are exempt from the oil embargo) have proven to be toothless (for more information on the pointlessness of European sanctions against Russia, please refer to the materials of the Re: Russia analytical center here and here). After his conversation with Putin, Trump, much to Europe’s disappointment, announced that he would not impose new sanctions on Russia: “Because I think there’s a chance to achieve something, and if we do [impose sanctions], we might make things worse. But there may come a time when this happens.”
The main argument of the 17th package is sanctions against almost 200 more vessels of the Russian shadow tanker fleet. But the problem is that the EU does not have its own working mechanism for monitoring the restrictions imposed, and they are only effective if supported by the United States, which means the threat of secondary sanctions. According to a Brookings study, the lion’s share of the tankers that make up the shadow fleet transporting Russian oil now come from Greek and other European shipowners.
The EU initially planned to review the price cap on Russian oil every two months, and three years after its introduction, Brussels has proposed discussing a reduction as part of the 18th package. However, few countries are complying with the cap. Reuters sources familiar with the discussion say that the plan is to reduce the maximum price from the current $60 to $50 per barrel, which makes sense given that the price of Russian Urals fell below $50 in April due to new US trade tariffs.
The West has no truly painful new tools to tighten sanctions against Russia. The only thing that could really work is very strict secondary sanctions on anyone who trades with Russia in any way. “This hasn’t happened, and it’s unlikely to happen,” says an economist from a Russian think tank. Maintaining such sanctions is expensive, and it’s difficult to control them. Implementing restrictions that can’t be monitored can lead to reputational losses, not to mention worsening relations with the countries targeted by the secondary sanctions, according to the expert.
