“The Most Powerful” Russian Currency and “Stable” Russian Economy: the Reality Behind the Propaganda

August 18, 2023
Against the backdrop of sanctions and geopolitical tensions, Russian propaganda portrays the Russian economy as “robust and immune to external pressures.”

And the Russian ruble is portrayed as “a symbol of strength and stability”.

However, as the months have marched on, cracks in this narrative have begun to show, revealing a stark divergence between the rosy propaganda picture and the underlying economic reality.

In 2022, Russian propaganda assured its audiences that the sanctions imposed by Western countries were having little impact on the Russian economy. Media outlets and official sources asserted that the Russian economy was resilient and capable of overcoming the challenges it faced.

Reuters: российский рубль возглавил рейтинг самых крепких валют мира - Новости Калининграда (klops.ru)

In reality, this assertion involves manipulation and distortion of facts. In the chart above depicting various currencies' performance against the US dollar, for instance, the ruble is in second place, while it is the Brazilian real that actually holds the top spot.

However, there are other concerns. What's more crucial is that this list neither reflects the stability of any specific currency nor provides substantial insights into various countries' economic conditions. With this chart, Reuters is merely recording currency exchange rate fluctuations in relation to the dollar.

The fact that specific currency rate changes don't correlate with the overall economic state is evidenced by the currencies of countries like Colombia, Kenya, and Nigeria surpassing those of highly developed countries like Australia, Singapore, Canada, Denmark, Norway, and the Eurozone.

However, based on this, no one is asserting that the economies of Kenya and Nigeria are stronger than those of the EU, Canada, or Norway.

Furthermore, while the Russian ruble did undoubtedly "strengthen" against the US dollar, this was driven not by economic factors, but by interventions.

According to Forbes magazine, "There's little pure economics in the ruble's strengthening. The key reason is Russian authorities' 'manual' efforts to support an economy suffering from sanctions."

In 2022, after the Russian full-scale invasion, the ruble's appreciation in value was driven by administrative interventions, such as the Russian government's requirement that exporters sell 80% of their foreign exchange revenue, various often semi-official complications related to currency purchases, a 60% decrease in imports, and the lack of demand for dollars and other western currencies due to a halt in Russian tourism abroad.

In April 2022, restrictions on foreign currency purchases for individuals were lifted, but buying dollars and euros remained complex.

According to economist Vladislav Zhukovsky, there were many hidden complications which meant that "the Central Bank [was] showcasing a favourable ruble-to-dollar rate you can't realistically obtain.

You can only see this rate on the board, but when you decide to buy currency at a bank, they'll say: we'll sell you dollars at 85 rubles, but we'll buy them from you at 65 rubles. Essentially, that difference between buying and selling the dollar - 15-20 rubles - is a quasi-fee for acquiring foreign currency. It's clear why no one wants to either sell or, especially, buy currency."

Thus, the claim that "the ruble is the world's strongest currency" is a manipulation; as its strengthening against the dollar was artificially detached from the economic realities in Russia. The favourable official ruble exchange rate thus cannot be viewed as an argument for the currency's stability and the resilience of the Russian economy.

We can see right now how much of a sham the ruble's performance was. The ruble has lost significant value and is currently among the three worst-performing currencies among developing nations. Analysts note that the primary reason for the ruble's weakness is the substantial capital outflow from the country.

The ruble's exchange rate has fallen by 30% against the dollar, which is a very substantial  decline. It has reached a level not seen since March of the previous year, while also falling precipitously against the euro.

These facts indicate that Russian propaganda in 2022 attempted to create a distorted image of economic stability, ignoring the real problems and challenges the Russian economy faced.

Moreover, Russian propagandist Vladimir Soloviev has criticised the Russian Central Bank's unsuccessful monetary policy, causing a stir with his emotional remarks during a recent broadcast.

"I have a question for all State Duma and Federation Council members. Please tell me: have you not noticed the current exchange rate of our currency in our country? Have any of you sent an inquiry to the Central Bank? To have these people come and explain what is happening in the country? What has happened to result in such an exchange rate?" Soloviev asked.

He emphasised that the ruble's depreciation would lead to an increase in inflation and consumer prices, underscoring that this would occur during the presidential election campaign. Soloviev also reminded viewers that the Russian ruble is among the world's worst-performing currencies, which even Russian propagandists cannot hide. As of Thursday, August 15, the market exchange rate was 97.20 rubles to the US dollar.

"Without even explaining why the exchange rate is fluctuating like crazy, now the entire international community is laughing at us!" the host lamented on his blog.

According to Soloviev, all this results from the "brilliant policy of the Central Bank, which is disdainful of people, not even uttering a word to them about anything."

A stark divergence between portrayal and reality emerges as we reflect on the narratives woven by Russian propaganda in 2022 and how they have borne out.

Russia's attempt to craft an image of unwavering stability and an economy shielded from the storm of international sanctions starkly contrasts with the challenges that have subsequently unfolded. The facade of a resilient economic landscape, perpetuated through a well-orchestrated disinformation campaign, failed to hold up against economic realities and global market dynamics.

Soloviev's critical stance against the Russian Central Bank's monetary policies marks an unexpected turn.

His recent emotional outburst vividly highlighted the disconnect between the official narrative and the lived reality. His pointed questions to the State Duma and Federation Council underscored the need for accountability and transparency in addressing the significant fluctuations in the ruble's exchange rate. His highlighting of the impending presidential elections underscored the gravity of the situation.

Soloviev's acknowledgement that the Russian ruble is among the world's worst-performing currencies shatters the façade of invincibility that Russian propaganda had carefully constructed. Even from within the propaganda sphere, this admission lays bare undeniable economic trends that have unfolded.

Alona Hryshko
Analyst at Internews Ukraine