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Russian Ruble Is Still Best Performing Currency In The World Despite Sanctions

Russian Ruble Is Still Best Performing Currency In The World Despite Sanctions

The Kremlin introduced a series of tight controls following Western sanctions

The Russian ruble is the best performing currency in the world this year.

When Vladimir Putin declared war on Ukraine in February, Western countries announced a swathe of economic sanctions, targeting financial institutions and banning the use of Russian oil and gas.

However, due to the Kremlin implementing a series of capital controls, which allow for tighter restrictions on the country's cash flow, the rouble is currently outperforming the dollar.

When the Moscow Exchange reopened after a two-day holiday yesterday, Wednesday, May 11, the ruble gained more than 11 percent compared to the US dollar since the beginning of the year.

This means it has made the largest gains among the world's 31 major currencies.

According to Bloomberg, this saw it overtake the Brazilian real, which is up just 9 percent for 2022.

The ruble is the best performing currency this year.

The capital controls introduced are in conjunction with Russia demanding ruble payments for natural gas supplies from European countries.

However, currency traders are set to stop using onshore exchange rates for some transactions due to concerns that the local rate is being inflated by capital controls implemented by the Kremlin.

This comes after leaked documents reportedly revealed that Russia's economy is facing its biggest collapse in three decades.

And according to reports, the Kremlin is predicting its economy will contract massively this year.

Documents seen by Bloomberg state that the Russian Finance Ministry is expecting a 12 percent collapse in gross domestic product (GDP). GDP is the value of all final goods and services made within a country during a specific period.

If true, experts believe it will add even more pressure on Putin, who has faced criticism over his handling of the ongoing war.

Russia has faced a number of economic sanctions since Vladimir Putin declared war on Ukraine.

However, the Kremlin has come out and denied the veracity of the claims.

"Preparation of official macroeconomic forecasts does not fall under the Finance Ministry's authority," said a spokesperson for the Economic Ministry.

It went on to say that 'expects that the measures taken by the government and the Bank of Russia will make it possible to ease to a large extent the negative consequences of sanctions and ensure stable economic development'.

Over the weekend, G7 countries including the US and UK announced another set of sanctions aimed at Russia.

Leaders agreed to wean themselves off Russian oil, a massive source of funding for Putin and the war in Ukraine.

A spokesperson for the G7 said: "We will continue and elevate our campaign against the financial elites and family members, who support President Putin in his war effort and squander the resources of the Russian people."

Featured Image Credit: Alamy

Topics: Russia, Ukraine, Politics, Vladimir Putin