### Russian Ruble in Freefall Amid Sanctions and Government Spending

The Russian ruble experienced a significant decline on Wednesday, plunging to its lowest point in more than two years. This drop comes as a result of several factors, including slumping oil prices, new sanctions targeting Russian enterprises, and increased government expenditure on military efforts. In response, the central bank has decided to halt currency purchases for the remainder of the year, a move aimed at curbing the ruble's supply and stabilizing its exchange rate.

This decision mirrors an earlier move last year following the uprising led by mercenary chief Yevgeny Prigozhin, which had similarly shaken market confidence. The central bank's intervention is also seen as a measure to manage the rising inflation, which has prompted an increase in the key interest rate to a staggering 21 percent. Official reports indicate an inflation rate of 8.5 percent, though market research firm ROMIR suggests the actual rate may be considerably higher.

The ruble has faced continuous downward pressure throughout the summer due to declining oil prices—Russia's main export commodity. Reduced demand from China and Europe, coupled with increasing oil production from the U.S., Brazil, and Guyana, has exacerbated the issue. Brent crude prices have dropped by nearly 4 percent this week alone, partly due to the ceasefire between Israel and Hezbollah.

Additional pressure came as the U.S. introduced new sanctions, specifically targeting Gazprombank, which had been handling the remaining gas payments to Europe. The sanctions also hit 50 internationally connected Russian banks, over 40 securities registrars, and 15 finance officials.

"The sanctions packages imposed are having their negative effects, felt by Russians mainly in the form of high inflation," remarked Grzegorz Drozdz, a market analyst at Conotoxia. The ruble plummeted to 114.75 against the U.S. dollar, a level not seen since March 2022 shortly after the onset of the Ukraine war. By the end of trading in Moscow, it had slightly recovered to 113.15, still marking a drop of over 7 percent in a single day.

The central bank's stringent monetary policies have faced criticism from prominent Russian industrialists like metals tycoon Oleg Deripaska and Sergey Chemezov, the head of the defense conglomerate Rostech. Chemezov's organization plays a crucial role in manufacturing equipment for the ongoing conflict in Ukraine.

"We need serious discussions on this topic," commented Mordashov. "This is a situation probably without precedent in modern world history, when the central bank rate is 2.5 times higher than inflation, and it still doesn't slow down." Despite raising interest rates to 21 percent at their last meeting, Governor Elvira Nabiullina has hinted at a further hike in the upcoming meeting. This year alone, the bank's policy rate has soared by 500 basis points, yet it has failed to stop the ruble from shedding nearly a quarter of its value against the dollar.