Rouble's decline mirrors tensions in Russia's nuclear stance

The rouble was at such a low level last in the summer of 2023. "The Moscow Times" reports that according to the official exchange rate set by the Bank of Russia for Wednesday (20th November), more than 100 roubles will be exchanged for a dollar. It was lower in recent years only after Russia's invasion of Ukraine began when about 150 roubles had to be paid for the American currency.

The newspaper notes that the downward trend has persisted essentially since Ukrainian forces struck the Kursk Oblast in early August. Over the last two years, the rouble has weakened against the dollar by 65.11 per cent and from the beginning of the year to 19th November by 10.8 per cent.

"The Russian Central Bank has been setting official exchange rates since the Moscow Stock Exchange suspended trading in dollars and euros in June due to U.S. sanctions. The rates are based on over-the-counter transactions involving large exporters and commercial banks," the newspaper recalls.

"The Moscow Times" highlights that the rouble's exchange rate fell after the Russian leader Vladimir Putin approved amendments to the nuclear doctrine, which lower the threshold for the use of nuclear weapons by Russia.

What's the deal? The updated Russian nuclear doctrine stipulates that the use of nuclear weapons by Moscow would be based on a "critical threat" to the sovereignty and territorial integrity of Belarus and Russia.

It also assumes that aggression directed at Russia by any country belonging to a military alliance would be considered aggression by that alliance as a whole. Furthermore, any attack on its territory conducted by a non-nuclear state with the involvement of a nuclear state will be considered a combined strike. Also, providing "territory and resources" for aggression against Russia would be grounds for applying "nuclear deterrence."

- The timing of the signing of the updated doctrine does not seem coincidental, as it comes less than two days after the media reported that the U.S. allowed Ukraine to carry out long-range missile attacks in parts of Russia. Russia most likely wants to show that it is reacting and to increase pressure on the U.S. to reverse its decision, or at least not further ease the restrictions on missile strikes - assessed Artur Kacprzyk, a nuclear deterrence analyst.

A weak rouble is both good and bad news for Russia. On the negative side, Kremlin propagandists spoke about this in August 2023. It was explained then that the exchange rate of the Russian currency against the American one affects the prices of goods, including those imported from China or India. The reason is simple: the dollar is also tied to currencies from these and other countries.

Russian media pointed out that for Russians accustomed to economic crises over the three decades since the fall of the Soviet Union, the rouble's exchange rate is of great symbolic importance as an indicator of the overall economic condition.

On the other hand, the weak rouble suits the Russian authorities, especially when the Kremlin plans larger military expenditures. And such plans are indeed in the works, as Bloomberg reported in October 2024.

A weaker currency means that Russian energy exports, dictated by global oil prices counted in dollars, will increase the number of roubles in the government's coffers," explained "The Moscow Times" last year.

Thanks to this, the Kremlin can pump even more money into an increasingly heated war economy and has more to spend on military salaries. The side effects of this are visible, for example, in the rising inflation in the country.