The Russian ruble ended September at about a five-year low against the euro, falling as far as 93.3 rubles to the euro on September 29. The same day, the ruble traded at 79.8 against the U.S. dollar, the weakest exchange since the oil-price crash in March.
"The fact that the ruble has fallen by 20 percent or even more so far this year is about two-thirds due to the political situation," said Russian economist Yevgeny Gontmakher. "Even the fall in oil prices that happened in February was prompted by our policies."
There are many factors influencing the ruble's downward trend, including the impact of the global coronavirus pandemic, worldwide nervousness surrounding the upcoming U.S. presidential election, and a sharp decrease in Moscow's revenues from the export of oil and gas.
In recent days, the decline has been exacerbated by the outbreak of fighting between Armenia and Azerbaijan over the disputed Azerbaijani region of Nagorno-Karabakh. "Although the Nagorno-Karabakh conflict itself may not have deep consequences for Russia, it has somehow unmasked growing anxiety about (1) a second wave of lockdowns and (2) the approaching U.S. elections," said a spot analysis by Alfa Bank on September 29.
But the real heart of the matter, Gontmakher says, are the policies of the government of President Vladimir Putin, who earlier this year pushed through a controversial package of constitutional amendments that, among other things, opened the door for him to remain president until 2036.
"With their propaganda, they are trying to shift the blame for the political dimension from our authorities to the Americans or the Europeans or the American election," Gontmakher said. "But in reality the main source of these problems is our own policies."
"Let's not conduct ourselves in such a way that every day they pile new sanctions on us," he said, mentioning Moscow's involvement in the fighting in Ukraine, Syria, and Libya. "At the very least we need another foreign policy. As far as domestic politics goes -- that is a whole other story."
The September 29 Alfa Bank analysis made the same point: "The recent ruble weakness is not a response to a deterioration of fundamentals but a reflection of growing geopolitical risk."
Uncertainty Over Sanctions
State television throughout September blamed the steady decline of the ruble on, among other things, uncertainty caused by the expectation of new international sanctions imposed against Russia.
Moderators, however, never mentioned that the new threat of sanctions stems from the August 20 poisoning of opposition politician Aleksei Navalny, which doctors who treated him in Germany believe was by a Soviet-developed nerve agent from the Novichok group.
Gontmakher agrees that the latest collapse in the value of the national currency is caused primarily by such concerns.
"A major contribution to the ruble's rapid devaluation was played by the Navalny case," he told RFE/RL's Russian Service. "Of course, Russian business is expecting new sanctions. And things are really only just beginning. We know that [Navalny] will return to Russia and that he will continue his activity and measures against him will continue, and so on."
Economist Igor Nikolayev agrees, adding that investors and others are particularly concerned about the possibility of sanctions targeting the nearly completed Nord Stream 2 gas pipeline from Russia to Germany.
"If there is an intensification of anti-Russia sanctions, including some that directly touch export revenues, that will be a blow to the ruble," he said.
Nikolayev says the pressure on the ruble built up when the central bank lowered a key interest rate to 4.25 percent in July, causing investors to shun ruble bonds and drive down the value of the ruble.
"That interest rate has never been at such a low level before," he said. "The weakening of the ruble was started by the authorities themselves because it was useful for them because of the budget deficit."
Russian Deputy Finance Minister Vladimir Kolychev told Reuters in July that the budget deficit could reach 5 percent of GDP in 2020 because of government spending to support key sectors of the economy during the pandemic.
"We've seen how disastrously export revenues have decreased this year but the government still needs to meet its obligations, in addition to its anticrisis measures," Nikolayev said. "So from a smaller and smaller number of oil dollars, the government wanted to squeeze more and more rubles."
But the Navalny poisoning in August was something "the Bank of Russia hadn't counted on" and the pressure on the ruble mounted, he added.
"As a result, the situation got out of control and now the government has to do something else," Nikolayev said. "So it is selling more foreign-currency reserves."
Opposition politician Leonid Gozman sees the problems with the ruble as part of a broader indictment of Putin's rule.
"Everything is going badly for our bosses," he said. "Not just the ruble. Belarus is going badly. International affairs in general are going badly. And all these things have a common root.... They are a consequence of a profound lack of trust in our government."
"It is enough for the finance minister to say that the ruble is stable and there is no need to worry to send citizens running to the bank to buy dollars with their remaining rubles," Gozman added. "Because if he says the ruble is stable, that means it is collapsing. It is not possible to function with such a low level of trust."
"I think the authorities have done everything perfectly, with great skill, to create a situation in which we do not believe anything at all," he said.
Economist Nikolayev sees grave warning signs in Russia's current economic predicament.
"Real cash incomes in the second quarter of this year fell by 8 percent, a disastrous decline," he said. "The government has postponed until 2030 the national goals that it set in 2018 and expected to reach by 2024. It is already clear that the goals won't be reached, so the deadline was shifted by six years."
"That is, there is mounting internal discontent, to say the least, over the economy," he concluded. "I have the feeling that this is going to make authorities increasingly nervous and the risk of a domestic crackdown is becoming greater."