What Caused the Russian Ruble Crisis?

Russia's ruble crisis and its implications

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The Russian economy was the eighth largest in the world in 2013 by nominal gross domestic product (GDP) valued at $2.3 trillion. The country's economy experienced rapid growth between 2000 and 2012, driven by higher energy prices and increased arms exports.


Following Russia's military assault on the neighboring nation of Ukraine in late February 2022, the U.S., the EU, and other nations imposed strict sanctions on Russia's largest financial institutions and enterprises, including Russia's central bank and energy giant Gazprom. The sanctions have pushed the Russian financial system into a new, and potentially prolonged, crisis.

Investors around the world felt sure that Russia was turning a corner and that foreign direct investment was flowing into the country. But Russia’s economy was on the brink of a crisis just a year later when the ruble fell to record lows against the U.S. dollar. The Russian central bank hiked interest rates by a massive 6.5%, but it failed to stem the tide. Investors lost confidence in the currency, but it recovered to some extent in 2016.

Key Takeaways

  • Russia's economy depends on crude oil and natural gas. It was weakened in 2014 when OPEC refused to cut production to boost prices.
  • Russia was subject to sanctions after it invaded Ukraine in 2014 and allegedly interfered in other countries' elections in 2016 and 2017.
  • Russia is working toward being less dependent on the dollar, but it would have to pay more in rubles to pay off its debt in U.S. dollars.
  • Problems in Russia's economy could lead to another financial crisis or a recession in the future.

Falling Oil Prices

Russia's economy has always depended on crude oil and natural gas. Commodities account for a large portion of its economy. Exports of crude oil and related products accounted for more than two-thirds of the country's total exports in 2013. That was more than half the government's total revenue.

But crude oil prices fell by about 50% in 2014 due to lower demand in Europe, Russia's key market, and to increased production in the U.S. The largest source of Russia's problems may have come when the Organization of the Petroleum Exporting Countries (OPEC) stated that it would not cut its production to boost prices in late 2014. OPEC eventually cut production, but crude oil prices still haven't bounced back to their old highs.

Crude oil prices felt a severe shock at the beginning of the COVID-19 pandemic but have since recovered with the improving economic situation. Due to recent inflationary pressures, it is difficult to determine if gas prices will continue to increase or become depressed in the 2020s. OPEC compliance is less than 50% by many accounts if you exclude Kuwait and Saudi Arabia. These countries can't be responsible for maintaining cuts on their own. U.S. shale production has proven to be flexible in response to falling crude oil prices. Levels recovered in 2018.

In February 2022, in response to Russia's invasion of Ukraine, oil prices soared past $100 per barrel, the highest price since 2014.

Political Risks

Russia's second problem relates to its foreign policy. The U.S. and the European Union imposed a number of financial sanctions that made it difficult for Russian firms to borrow abroad after the country invaded Ukraine in February 2014. These sanctions grew with the country's alleged interference in the U.S. and European presidential elections in 2016 and 2017, and with its military interventions in Ukraine and Syria.

President Vladimir Putin admitted that these sanctions are harming the economy. There are signs that these sanctions may be discouraging families from having more children over the long term. This could have devastating long-term effects.

Russia reduced its U.S. Treasury holdings from $96 billion in March 2018 to $14 billion in May 2018 in response to fears that U.S. sanctions would freeze a large portion of the country's international reserves.

Dollar Debt

The third problem deals with Russia's U.S. dollar-denominated debt. The country went into 2017 with holdings of over $11.1 billion in ruble-denominated debt, and with $62.4 billion (rubles) in dollar-denominated debt. It would likely have to pay more in rubles to pay off its debt in U.S. dollars.


Russia is working on a plan to become less dependent on the dollar, such as by increasing the number of trade deals executed in rubles and other currencies.

The Bottom Line

The Russian ruble crisis had many causes. It contributed to a sudden crisis of confidence, including falling energy prices, heightened geopolitical risks, and increasing demand for the U.S. dollar. The country still suffers from the same problems that caused the crisis.

Given the ruble crisis and its aftermath, you may want to take caution if you're thinking about investing in Russia. Dollar-denominated debt could become difficult to service in rubles. Equities could suffer due to deteriorating spending power among consumers and businesses. These trends could lead to a similar crisis or a recession down the road.

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  1. World Bank. "GDP (Current US$) - Russian Federation."

  2. Bank of Russia. "Statement by Bank of Russia Governor Elvira Nabiullina After the Board of Directors Meeting Held on 16 June 2014."

  3. U.S. Energy Information Association. "Oil and Natural Gas Sales Accounted for 68% of Russia’s Total Export Revenues in 2013."

  4. U.S. Bureau of Labor Statistics. "The 2014 Plunge in Import Petroleum Prices: What Happened?"

  5. U.S. Energy Information Administration. "Short-Term Energy Outlook."

  6. U.S. Energy Information Association. "EIA Adds New Play Production Data to Shale Gas and Tight Oil Reports."

  7. Trading Economics. "Crude Oil."

  8. U.S. Department of State. "Ukraine and Russia Sanctions."

  9. European Union. "EU Restrictive Measures in Response to the Crisis in Ukraine."

  10. President of Russia. "Presidential Address to the Federal Assembly, Jan. 15, 2020."

  11. U.S. Treasury. "Major Foreign Holders of Treasury Securities."

  12. The Ministry of Finance of the Russian Federation. "Public Debt Management Policy of the Russian Federation for 2017-2019," Page 54.

  13. Trading Economics. "Russian Ruble, 1996-2022."

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