Russian ruble drops to historic low amid sanctions
MOSCOW (AP) — Russia's currency dropped to an all-time low against the dollar on Tuesday as investors fret about the fallout of economic sanctions.
The United States and the European Union last week imposed a new round of sanctions against Russia for its actions in Ukraine that consisted in, among other things, blocking off Western financial markets to key Russian companies and limiting imports of some technologies.
The Russian currency fell more than 1 percent to 38.80 rubles against the U.S. dollar by noon Moscow time Tuesday. The ruble has lost over 2.7 percent in just two days.
Economist Alexei Kudrin, who served as finance minister under President Vladimir Putin for 11 years until 2011, said Tuesday that the sanctions could send Russia's economy into recession for one or two years. Russia would not return to high growth again unless it implements much-needed reforms, he warned in comments carried by Russian news agencies.
"The sanctions that have been imposed are going to have an effect (on the economy) for the next one or two years because they have limited opportunities for investment in this uncertain environment," Interfax quoted him as saying.
Among the most recent sanctions, the United States on Friday tightened the maximum credit duration for a number state-owned Russian companies and banks to 30 days, effectively shutting off Russia from long-term loans. The U.S. and the EU indicated, however, they may reverse some of the sanctions if they see that Moscow is supporting peace process in Ukraine, where more than 3,000 died since mid-April.
Jitters over the impact of U.S. and EU sanctions were fueled by reports that the Russian government is preparing more import bans, which could ultimately hurt Russian consumer spending.
Russia in August imposed an import ban on dairy products, meat and vegetables from the European Union and the United States, causing price hikes for selected foodstuffs.
Russia saw investors pull a whopping $61 billion in capital out of the country last year, largely due to concerns over the investment climate. The money has been flowing out of Russian even faster this year, with market watchers like Kudrin now predicting about $110 billion could be withdrawn by the end of the year.