Ruble Hits Early War Lows Following Prigozhin’s Mutiny

The Russian ruble slid to lows unseen since the weeks after Moscow launched its invasion of Ukraine, amid fallout from the mercenary boss Yevgeny V. Prigozhin’s aborted insurrection and declining Russian oil and gas revenues.

The currency fell as low as 94 rubles per dollar on Thursday before making a slight recovery by the end of the trading day, jolting confidence among Russians, who often interpret the exchange rate as an indicator of the nation’s financial well-being.

The ruble hasn’t seen such lows since March 2022, the month after President Vladimir V. Putin ordered Russia’s full-scale invasion of Ukraine and triggered a raft of Western sanctions that briefly sent the country’s economy into a tailspin.

“I think it is very plausible that this is connected to the political events we have seen in the past few weeks,” said Janis Kluge, a researcher who focuses on the Russian economy at the German Institute for International and Security Affairs. “We saw it didn’t happen right away, but you can explain this. Capital mobility is limited in Russia; it’s not that easy to move big sums abroad that quickly. So it is plausible that it could have taken some time to unfold.”

The initial weeks after the invasion in 2022 brought deep economic turmoil to Russia, with the ruble crashing briefly. But the currency then made a dramatic recovery, hitting seven-year highs a few months later, as Russia experienced a record surplus, owing to a surge in oil prices and a reduction in imports.

But now the environment has changed. The political instability implied by Mr. Prigozhin’s failed insurrection, combined with dramatically reduced export revenues from Russian oil and gas, appear to be weighing on the ruble. By the end of the trading day on Thursday, the Russian currency was 91 rubles per dollar, from 83 the day of the mutiny.

The Russian central bank governor, Elvira Nabiullina, speaking Thursday at a conference in St. Petersburg, appeared to attribute the change in the ruble’s value primarily to falling export revenues. She said Russians often start floating conspiracy theories about attempts to boost government revenue when the currency falls, but in fact, the exchange rate is largely a reflection of the country’s foreign trade.

“Many interpreted the significant strengthening of the currency last year as a victory over the circumstances,” Ms. Nabiullina said. “But we must admit honestly that it was above all the consequence of a sharp increase in exports and a reduction in imports.”

The Russian central bank retains tools to influence the currency, Ms. Nabiullina noted, but she said a floating exchange rate remained good for the country and was helping the Russian economy absorb external changes and shocks more easily.

A combination of forces has been battering the ruble in recent days, most prominently Mr. Prigozhin’s brief, failed insurrection. The mercenary boss seized a southern Russian city and sent his fighters marching on Moscow last month, which raised questions about domestic stability in Russia.

As the events unfolded, the rate to exchange rubles to dollars and other foreign currencies on Russian online banking applications spiked, suggesting that consumers were moving their money out of the Russian currency in response.

But it likely isn’t only the possibility of more domestic instability that has been hitting the currency.

Russia’s revenues from oil and gas are down sharply from the bonanza of last year. The Russian budget’s oil and gas revenues fell by 47 percent in the first half of 2023 compared to the same period the prior year, Reuters reported on Wednesday, citing Russian finance ministry data.

Exporters may also be leaving their earnings in dollars or euros in accounts outside Russia, instead of bringing the money into rubles, a phenomenon that has become increasingly common over the past year, Mr. Kluge said.

Western sanctions, including an oil embargo and price cap aimed at reducing Russia’s export revenues, have also impacted the currency. So has the Russian government’s response to sanctions, which has included capital controls.

“What’s happening right now with the ruble is absolutely 100 percent a function of sanctions,” said Alexandra Prokopenko, a former Russian central bank official and a nonresident scholar at the Carnegie Russia Eurasia Center.

A weaker ruble could help the Russian government cover its ballooning expenses. The Russian deficit for the first five months of the year already exceeded the target for the entirety of 2023, as oil revenues declined, while wartime spending climbed.

The risk, Mr. Kluge said, is that Russians see the currency slide and scramble to move their money out of rubles.

“Now that people are seeing the ruble is declining so quickly, this could lead to more attempts to move ruble savings into other currencies,” he said. “We saw this at the very beginning of the war when the ruble crashed.”