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Ruble Leads Currency Retreat Across Former Soviet States

A woman walks past a board listing foreign currency rates against the Russian ruble in Moscow on January 21.
A woman walks past a board listing foreign currency rates against the Russian ruble in Moscow on January 21.

The Russian ruble dropped to a new historic low against the U.S. dollar as currencies across the former Soviet Union continued to sputter amid persistently low oil prices.

The ruble traded at more than 85 to the dollar for the very first time on January 21, a fall of more than three percent from the previous day's low of 82.4. It later clawed back to about 84.2.

Russia, like other nations dependent on sales of oil and gas to fill state coffers, has been hit hard by the steep decline in global oil prices, now below $28 a barrel, a 12-year low. The ruble has lost more than half its value against the dollar in the last two years.

As the ruble continued on its downward trajectory, President Vladimir Putin's spokesman sought to reassure Russians that the situation is not critical.

"I wouldn't use the word 'collapse.' The rate really is changing, the rate is volatile, but it's far from a collapse," said the spokesman, Dmitry Peskov.He said Putin has no plans for any emergency meetings.

Putin's longtime former finance minister, Aleksei Kudrin, predicted that oil prices could go even lower.

"It could be 18 or 16 dollars per barrel, but for a short time, then the price will adjust and rise," Kudrin told an economic forum in Moscow, the Interfax news agency reported.

Even if that does not happen, the current oil price has Russia far outside of its comfort zone.

When Putin told the nation in December that the worst of the economic crisis was over, he also acknowledged that Russia's 2016 budget was based on an overly optimistic oil price of $50 per barrel.

Unless oil prices rise fast, Russia may have to turn to unpopular tax hikes or spending cuts to plug the budget deficit -- or dip into dwindling rainy-day funds that held about $180 billion in mid-2014 but contained about $130 billion in December.

The record-low ruble rate comes with ties between Moscow and the West badly strained by Russia's intervention in Ukraine over the past two years.

It happened to coincide with a January 21 statement by a British inquiry that Putin "probably approved" the killing of former Russian Federal Security Service (FSB) officer Aleksandr Litvinenko with polonium-210 in London in 2006.

Putin presided over strong economic growth fueled by rising oil prices during his first two terms in 2000-2008. Russia's economy suffered in the global financial crisis of 2008-2009, but Putin returned to the Kremlin in 2012 after four years as prime minister and has not ruled out seeking a fourth term in 2018.

Russian officials have acknowledged the need to diversify the economy away from reliance on energy exports and to tackle corruption, but critics say there are few signs that the Kremlin is committed to such steps.

Bleak Outlook

Other recent news on the economic front is also far from rosy for Russia.

The International Monetary Fund (IMF) predicted on January 19 that Russia's economy will contract by 1 percent in 2016 following a shrinkage of 3.7 percent last year, before returning to 1 percent growth in 2017. The government had been hoping for growth this year.

Also on January 21, the Russian central bank announced it had revoked the license of Vneshprombank, one of the nation's top 50 lenders, after evidence was uncovered that "persons exercising control over the bank" had stripped its assets.

Vneshprombank reportedly holds funds for major Russian state companies.

With its currency woes, Russia is far from alone among former Soviet republics.

The Belarusian ruble fell 5.1 percent to the dollar on January 21, trading at 21.564 at midday. It has lost about 14 percent of its value against the dollar since January 1.

In Kazakhstan -- like Russia, a major energy producer -- the national currency, the tenge, fell to a record 383.91 against the dollar on January 21.

Central bank head Daniyar Akishev ruled out introducing capital controls and said he did not expect major shocks for the country's balance of payments since "most of the negative scenarios ... have already happened."

The South Caucasus state of Azerbaijan, another major oil exporter, has witnessed widespread protests sparked by a deep drop in the value of the national currency.

The manat has lost about one-third of its value against the dollar since December, when the central bank relinquished control of its exchange rate in a move that prompted many Azerbaijanis to withdraw their savings.

On January 19, the parliament in Azerbaijan passed a package of measures aimed at coping with the crisis, including a 20 percent charge on foreign exchange taken out of the country for investment abroad.

With reporting by Interfax, dpa, Reuters, and AP
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