opinion | The ruble has bounced back. What does that mean?

Even though Russia currently has a lot of foreign currency, the authorities are checking it in case things get worse. Ordinary citizens can no longer take large amounts of euros and dollars out of the country. The central bank is demanding that 80 percent of euros, dollars and other hard currencies entering Russia be converted into rubles, either on a Moscow exchange or through an authorized bank. The central bank then forwards those hard currencies to the Treasury Department and private banks, who use them to repay foreign debt, and to companies that the bank decides they can import products.

The Kremlin also demands that unfriendly countries pay for their purchases of natural gas (so far no oil) in rubles. They can pay in euros, dollars or any other currency specified in the contracts, but 100 percent of those currencies will be converted by Gazprombank (the bank that serves Gazprom, one of the world’s largest gas producers) at the official exchange rate. in rubles to complete the transaction. “The anticipation of this policy has changed many traders’ views of the ruble,” said Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center.

Germany and Italy, the countries most affected by this demand, have opposed the Russian demand, alleging it violates their contracts. “At the moment there is a real chicken game,” said Jane Foley, London currency strategist for Rabobank Nederland.

Backing the ruble and proving that Biden’s rubble comment is incorrect “is a very important propaganda signal,” said Sergei Guriev, an economics professor at Sciences Po in Paris who headed the New Economic School in Moscow from 2004 to 2013.

Also politically valuable for Putin is Russia’s insistence on settling oil and gas transactions in rubles rather than dollars. “Putin says, ‘I want to impose my rules. I will not be a regulator. I will be a rule maker. I want you to settle for rubles,” Aleksashenko said.

Still, shutting down the exchangeability of the ruble cannot forever isolate Russia from market forces. The sanctions are already raising inflation and will increasingly lead to shortages of key components for manufacturers, Aleksashenko said. The currency will come under renewed pressure as Russia faces large payments on foreign currency debt, Foley said. The ruble will also come under downward pressure if Russia allows foreign companies withdrawing from the country to sell assets and cash out, she said.

Then there is brain drain. “Everyone I know is trying to run away from Russia,” Guriev said at a video seminar in Princeton in March. Lichfield told me: “The economic outlook for Russia is still very bleak. The re-imposition of capital controls has negative implications for Russia’s future.”