[Stocks, FX] The downfall of Russia and the collapse of the ruble


As of March 2022, Russia’s unilateral invasion of Ukraine continues. Kyiv has not fallen yet, and it is a long-term battle, which is the most troublesome development for Russia. Russia’s international isolation is decisive, as it has also harmed the general public, including indiscriminate bombing and residential area attacks. Naturally, the Russian currency, the ruble, is also destined to plummet. The downfall of Russia is no longer a definite matter, and the ruble may be a waste of paper.


The downfall of Russia

With Russia’s invasion of Ukraine, countries around the world are imposing thorough economic sanctions on Russia. Since the economy is closely linked to the world in modern society, such economic sanctions will lead to a significant decline in national power. I will summarize what kind of sanctions are occurring.

Exclusion from SWIFT

SWIFT = International Banking Communications Association is a non-profit organization headquartered in Belgium and is a so-called global payment network that handles international financial remittances. It is said to be one of the strictest economic sanctions because it makes it difficult for companies in the country to settle trade when it is locked out of SWIFT and becomes unavailable. Russia has begun a one-sided plunge of the ruble as it has been locked out of the world. As EU President Ursula von der Leyen emphasized in a statement, “This is the largest sanction in EU history,” it is a very big and decisive economic sanction in recent history.

Oil and natural gas cannot be sold

European countries, including Germany, rely on Russia for more than 30% of their oil and natural gas supply. However, with this sanction, Russia has lost the ability to sell resources, making it impossible to make a profit. Originally, Russia has a weak economic power and its GDP is not so high in the world. It is likely to be a decisive blow and the Russian economy is clogged.

Asset freeze

Countries around the world have frozen their assets against the top Russian ministers, including President Putin. It is unclear to what extent Putin’s enormous wealth is known to governments, but it does work. This kind of direct sanctions on the top of the country suggests that the sanctions are quite strict, and at the same time, it is a manifestation of each country’s determination to strike thoroughly.

Sanctions on the Central Bank of Russia

Countries around the world have announced that the Central Bank of Russia will freeze its foreign assets. What this means is that you can’t move your assets freely. The foreign currency of the Central Bank of Russia is deposited in each country. Even if the Central Bank of Russia tries to withdraw foreign currency, each country does not permit it. This is a fatal situation for Russia, and the movement to sell the Russian currency ruble is rapidly increasing. If the asset freeze prevents us from selling foreign currency and intervening in the market, we will not be able to buy and support the ruble.

Sports and entertainment industries also expel Russia

Russia has also been banished from the sports world. In football, they were locked out of the UEFA and FIFA. The International Olympic Committee also expelled Russia. Others such as hockey, motorsports, tennis and figure skating have also banished Russia. The International Judo Federation has removed President Putin from the Honorary Chairman. In the entertainment industry, Walt Disney, Universal Studios, Warner, Sony and others have decided to suspend the release of new theaters in Russia. With the complete isolation of Russia, each Russian industry has been hit hard.

Ruble crash

Against this background, the Russian ruble has not stopped slumping. The chart below is an hourly chart of RUB / JPY on March 4, 2022. As you can see, there is a temporary buyback, but the crash does not stop. The only way to stop this crash would be to stop the invasion of Ukraine immediately, assassinate Putin and the military, and apologize to countries around the world, but it is unlikely. Russia is already politically and economically packed. Whether you win or lose Ukraine, Russia is destined to collapse. Few people will buy rubles from now on, except for gamblers.

RUB/JPY 1 Hour Term Leg 03-2022