As Western sanctions begin to bite down on the Russian economy, Russian independent news outlet The Bell provided some insight into the ruble losing freely convertible status due to financial pressure coming from Western capitols over the Kremlin’s invasion of Ukraine.
“The ruble is no longer a freely convertible currency,” [former Finance Minister Alexei] Kudrin admitted Tuesday to journalists. Prior to late February, the ruble was one of the world’s few dozen fully convertible currencies — not even the Chinese renminbi enjoyed such a status, wrote The Bell.
Even Kudrin — who is considered to be close to Russian President Vladimir Putin — was unable to hide his disappointment. And it was deeply symbolic that it was Kudrin who was the first official to talk publicly about the end of the convertible currency era. Finance minister in 2006 when the ruble gained its freely convertible status, Kudrin said last year in an interview that this achievement was one of his proudest moments in government.
“The convertibility of the ruble will remove all barriers to investment,” Kudrin said in 2006 shortly after the status was confirmed. “It makes the Russian market more attractive”.
Planning to make the ruble convertible again is something from the realms of fantasy. For a start, currency controls would have to be removed. As sanctions continue to tighten, that is totally unrealistic. “Without some kind of geopolitical normalization, removing currency controls could prompt an uncontrollable capital outflow and an increasing risk of financial instability,” a source at a foreign financial institution told The Bell.