Rouble hits 2-year high
The Russian rouble surged to a more than two-year high against the euro on Friday, aided by capital controls, as Russia looked to make a last-ditch effort to avert default. The central bank lowered interest rates by 300 basis points, 14 per cent.
The finance ministry appeared to do a last-minute U-turn to prevent a default, paying several already-overdue international debt payments in dollars after committing to pay them only in roubles.
The Bank of Russia dropped its key interest rate by 300 basis points for the second time this month, shocking economists who had predicted a lesser fall as it strives to control a declining economy and increasing inflation.
Recently, the rouble has strengthened as export-oriented firms sold their foreign exchange earnings to meet local liabilities that could top 3 trillion roubles ($43 billion) this month.
The rouble had fully recovered to pre-February 24 levels when Russia launched a “special military operation” in Ukraine, resulting in unprecedented Western sanctions, including a freeze on Russia’s reserves and steps to limit Russian banks’ access to the global financial system.
Shift to the ruble in Kherson
Kherson, in southern Ukraine, was the first major city to fall to Russian forces, who invaded the country in late February. The city was encircled within the first several days of the assault, and significant areas of it were cut off from water, electricity, and food. It may do so by installing a Russian-backed administration, as it did in Donetsk and Luhansk in 2014, ousting local politicians and putting pro-Russian elites in control of territory ripped from Kyiv’s authority, which Russia invaded the same year.
A referendum in Kherson would be held to maintain the “veneer of legality” for direct annexation of southern Ukrainian areas or acknowledgement of their independent statehood and potential incorporation into Russia. Kherson, a Black Sea city of around 300,000 people, is strategically vital to Russia. Kherson, located directly on the Russian-annexed Crimean peninsula, serves as a gateway to southern Ukraine. It has crucial sea and river ports, and it is located on the Dnieper River, which allows Russia to shut off Ukrainian forces from the Black Sea coast.
