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For Western sanctions advocates, the ruble's sharp decline this year is a clear signal that economic sanctions imposed on Russia over its invasion of Ukraine are beginning to have an impact.
They said the Group of Seven (G7) most industrialized nations should strike while the iron is hot and lower the ceiling price of Russian crude exports, which is now $60. The goal: To squeeze Kremlin revenues and force Russian President Vladimir Putin to choose between economic stability and military spending.
The Russian Central Bank raised interest rates to a record high of 3.5 percentage points. The decision was taken during an extraordinary meeting earlier this month, after the ruble's value fell below one US cent. The value of the Russian ruble has fallen by 30% since the beginning of the year, while the war in Ukraine seems like it will not end.
"Russia needs to raise interest rates enormously to stabilize the ruble. We have the power to give Putin the financial crisis he deserves. We need to lower the G7 price ceiling," Robin Brooks, who is chief economist at the Washington-based Institute for International Finance, wrote on August 15.
Aleksandra Prokopenko, a former analyst at the Russian Central Bank, supported this view, arguing that the sanctions are working and reducing the price Moscow receives for oil, its main source of revenue, will put Putin's economy in a difficult position.
The Russian president's determination to continue at all costs with the failed invasion of Ukraine "is putting the economy in an increasingly unstable position," said Prokopenko, who is now a non-resident scholar at the Carnegie Center for Russia and Eurasia, an institute with headquarters in Berlin.
To plunge the Russian economy further into crisis, "the West must continue to hit the Kremlin's sources of income, including by lowering the price ceiling for oil, but also similar measures for other Russian exports and closing legal loopholes that have the sanctions," she wrote in an opinion piece published in Bloomberg on August 17.
But, some oil analysts argued that this cannot happen so soon./REL
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