Russia’s ruble drops to 14-month low after “rebellion” challenges Putin’s leadership

The ruble reached a 14-month low against the dollar and major equity markets were agitated Monday after an aborted weekend mutiny in Russia that stoked concerns about stability in the nuclear-armed country.

The chief of Russia’s Wagner mercenary group, Yevgeny Prigozhin, said Saturday that he’d agreed to halt his forces’ “movement inside Russia, and to take further steps to de-escalate tensions,” in an agreement brokered by Belarusian leader Alexander Lukashenko. 

The Wagner group boss earlier ordered his forces to march toward Moscow after unleashing a long series of videotaped remarks threatening to topple Russia’s military leadership, which he blasted as having misled the country and Russian President Vladimir Putin himself about the Ukraine war. 

While the advance was called off before it reached Moscow, analysts said the rebellion showed President Vladimir Putin’s grip on power was more fragile than previously thought.

It also added to unease on trading floors, where investors last week reversed a recent rally in stocks owing to concerns about ever-rising interest rates aimed at fighting stubbornly-high inflation.

The ruble hit 85.37 to the dollar — a level last seen in April 2022 shortly after Moscow’s invasion of Ukraine. The ruble fell further on Monday to 83.89 to the dollar before recovering slightly.

Oil prices rose as Russia is a major producer, but concern about demand owing to the impact of rate rises kept gains limited, while futures for European natural gas jumped.

The revolt came after Prigozhin had railed for months against the Russian military’s handling of the war in Ukraine. But Wagner mercenaries returned to their base Sunday after Putin agreed to allow Prigozhin to avoid treason charges and accept exile in neighbouring Belarus.

U.S. Secretary of State Antony Blinken said the rebellion was a “direct challenge” to Putin’s authority. 

“This raises profound questions,” Blinken told “Face the Nation” on Sunday. “It shows real cracks. We can’t speculate or know exactly where that’s going to go. We do know that Putin has a lot more to answer for in the — in the weeks and months ahead.” 

The agreement halted an escalation of the crisis but observers warned that markets were susceptible to any further instability in Russia.

“Even though the Prigozhin mutiny may not cause larger market movements directly, this could quickly change depending on how the political situation in Russia unfolds in coming months,” Erik Meyersson, at SEB AB, said.

“Markets will likely become more sensitive to internal political matters in Russia.”

Added Liam Peach, an economist specializing in emerging European markets at Capital Economics: “There are a lot of unknowns about how things will play out at this point. While a full-blown war economy looks unlikely, a larger war effort could still threaten the unstable equilibrium that has, to this point, been able to preserve macroeconomic stability in Russia.”