Today's R:$ rate is 81. One year ago it was 60, so the value of the Ruble in dollars has slid by 1/3rd. Shortly after Putin's invasion and before Elvira Nibulina (Chief of the Russian Central Bank) stabilized the Ruble, the exchange rate briefly hit 107 then it fell by half. Now, it is sliding again.
For a country that does not have a robust consumer goods industry, the exchange rate makes an important difference to standards of living. Imports become more expensive. Normally, a soft currency like the Ruble would benefit the economy by improving the international competitiveness of its exports, but Russia only exports fossil fuels and a few minerals. NATO and the EU have capped Russian water borne oil prices at $60 a barrel so Russia sells each barrel below world market prices (around $70 today) but must pay for imports with expensive dollars or Renminbi exchanged at a discount. The EU has pretty much weaned itself from Russian Natgas. Monthly Russian exports have fallen by 60% in value so far in 2023 compared to 2022.
What impact will this have on the war? The RF can continue to finance its "Special Operation" for probably another year or more without fear of bankruptcy but standards of living even in Moscow and St Petes will start to crumble. Public services will be cut except those promised to lure the naive into military service and those promises will be welched on by an impoverished post war state.
Coupling economic tremors with security fears arising from the drone strikes and the recent fighting in Belgorod Oblast, the Russian public and especially the elites are beginning to be increasingly frightened. They are haunted by memories of Nuremberg and nightmares of Gotterdammerung. Media anchors like Soloyov and Samogon have sounded unhinged for months, Medvedev too and now they are virtually foaming at the mouth promising annihilation for Ukraine and reprisals for the US and UK.
But in my opinion, the putin remains secure. Everyone knows that "he who strikes at the king had better be sure he doesn't miss". Defenestration or a cup of bad tea are looming risks for elites who speak up or even are suspected of "thinking up". Further, whoever seeks to replace the putin will need to be able to organize a viable replacement government and that would require gaining wide support from a bitterly factionalized elite. Some of those elites like the traditional Solovki control their own armed formations and Wagner is not the only Private Military in Russia. Last, whoever would choose to follow the putin will inherit enormous political, economic, and social problems. Here is one that hasn't been remarked on: Prigozhin promised freedom for his Wagner convicts after six months in the field. That term is up and the survivors are returning to Russia. Many are bringing their weapons with them. Remember these "troops'' were recruited out of dire prisons.
Most of the Russian Federation's empire is backward and poor. THe Republics and oblasts with mineral wealth have been ripped off for centuries by the State. Should the strong center weaken, how long would it take for the far republics and oblasts to start to look elsewhere for protection and trade. The Kazakhs are ready to oblige, and so will Xi. In the 19th century, the Romanovs stole 1.5 million sq miles of Mongolia from the Ming. Xi knows he can have it back at no cost if he times his moves correctly. Who would object to China righting this wrong, especially if it were to take the Taiwan porcupine's place in China's irredentist plans.
All of this will progress through dangerous and difficult times. On the upside, the world may be more peaceful and more stable when the disruption ends. And, it will all be very interesting to watch as long as one does not have to participate.
Ron Levin
