What is the Russian ruble (RUB)?
The Russian ruble is the national currency of the Russian Federation. The ruble is the second oldest currency still in circulation, behind the pound sterling. It is made up of 100 kopecks.
Key points to remember
- The ruble is the currency of the Russian Federation.
- The ruble has been in use since the 13th century, making it the second oldest national currency still in existence, behind the pound sterling.
- The ruble exchange rate tends to rise and fall with world oil prices, given Russia’s position as one of the world’s leading exporters of oil and natural gas.
- In December 2021, the Bank of Russia began testing the prototype of a digital ruble.
Understanding the Russian Ruble (RUB)
The ruble (RUB) has been in use since the 13th century and has seen several incarnations during this time, including multiple revaluations and devaluations. The most recent changes occurred before the fall of the Soviet Union in 1992 and during the redenomination in 1998. The redenomination of 1998 made a new ruble worth 1,000 old rubles.
In recent years, the currency’s exchange rate has generally followed global commodity prices, especially oil prices, as Russia’s economy is highly dependent on exports of oil, natural gas and other natural resources. The ruble crashed in the second half of 2014, losing about half of its value against the US dollar as global oil prices plunged. The economic and financial sanctions imposed by the United States and the European Union on Russia in July 2014 following its invasion of Ukraine have also contributed to weakening it.
In late 2017, the National Bank of Ukraine banned all Ukrainian banks and other financial institutions from circulating Russian banknotes featuring images of Crimea, a region of Ukraine that Russia annexed in 2014.
Following Russia’s invasion of Ukraine in February 2022, the US, EU and other countries imposed strict sanctions on Russia’s largest financial institutions and firms, including the Russian central bank and energy giant Gazprom. These sanctions caused the value of the ruble to fall.
The Russian economy
Russia is more than twice the size of the 48 contiguous US states and is endowed with enormous natural resources. Yet Russia’s annual gross domestic product (GDP), ranked only 11th in the world in 2021, is only 7.72% the size of the US economy. Indeed, Russia relies heavily on natural resource exports, rather than higher value-added industries. In fact, in terms of GDP, Russia lags behind much smaller countries, such as Italy and France.
Ongoing political tensions have hurt Russia’s economy, as the country has repeatedly faced sanctions from the international community. The value of the ruble and many Russian businesses fell after Russia began its invasion of Ukraine in February 2022.
The digital ruble
President Vladimir Putin announced in 2017 that the Bank of Russia would issue a Central Bank Digital Currency (CDBC). Although many countries are now exploring CBDCs, Russia was one of the first countries to do so. In December 2021, a prototype of the digital ruble was completed and the first transfers using the digital ruble platform were successful. The Bank of Russia has announced that 12 Russian banks are ready to start using the digital ruble.
The value of the digital ruble is identical to the value of an ordinary ruble.
In February 2022, many commentators suggested that Russia could evade international sanctions by using cryptocurrency. Although a CBDC is very different from a private cryptocurrency, a digital ruble could limit Russia’s reliance on the use of foreign currencies, such as the US dollar.