Russian ruble hits record low as sanctions hammer Gazprombank

On Nov. 27, the ruble fell to 112.61 against the dollar, hitting an all-time low of 114 rubles per dollar during the day, according to data from Investing.com. The Central Bank of Russia set the official exchange rate for the day at 105 rubles per dollar and 110.49 rubles per euro.

Earlier this month, Russian Finance Minister Anton Siluanov suggested that a weaker ruble could boost exports. However, reality has outpaced official forecasts. The Ministry of Finance had projected an average exchange rate of 103 rubles per dollar by 2027, but the ruble has depreciated far faster than expected.

Since August, following reports of Ukraine's incursions into Russia’s Kursk Oblast, the ruble has lost around 20% of its value against the dollar, LSEG reports. On Nov. 20, the ruble crossed the 100-per-dollar threshold for the first time since October 2023. This followed reports of Ukraine’s successful strike on a Russian military headquarters in Kursk and Russia's use of an intercontinental ballistic missile against Ukraine on Nov. 21. The escalation prompted new Western sanctions, further accelerating the ruble’s decline.

The Gazprombank factor

Experts believe that sanctions targeting Gazprombank were a key trigger for the ruble's collapse.

On Nov. 21, the U.S. imposed sanctions on Gazprombank and six of its international subsidiaries in Africa, Hong Kong, Luxembourg, and Cyprus. The bank lost access to the SWIFT payment system, which it had uniquely retained in Russia during the war. Despite Russia's invasion of Ukraine, Gazprombank had served as the main channel for Europe’s payments for Russian gas. Following these sanctions, banks in 20 countries stopped servicing Gazprombank's UnionPay cards, and even China’s largest financial institutions ceased accepting them.

At the same time, shares of Gazprom, Russia's state-controlled gas giant, plummeted alongside the ruble, dropping to below $1 per share.

“Sanctions imposed on Gazprombank are likely the main driver behind the ruble’s recent weakness. The bank was the main wallet for Russian exporters. However, the Russian authorities are not overly concerned with this decline, as they have gradually lowered requirements for exporters to sell foreign currency earnings this year. A weaker ruble increases oil and gas revenues for the Russian budget,” said Oleksandr Paraschiy, head of research at Concorde Capital, in comments to NV Business.

According to Serhiy Fursa, deputy director at Dragon Capital, the ruble’s decline has multiple causes. “The key reason is sanctions, particularly the recent tightening of restrictions on the financial sector. While this helps Russia finance its budget deficit, it also drives inflation, which remains the biggest challenge for the Russian economy,” Fursa told NV Business.

Ivan Svitek, chairman of the board at Unex Bank, agreed that the ruble’s depreciation stems from multiple factors. “On a broader level, it reflects growing geopolitical risks for the country. For instance, the recent ceasefire agreement between Israel and Lebanon has created conditions for lower oil prices,” Svitek explained. He added that Russia is also facing a domestic crisis in the construction sector following the cancellation of subsidized mortgage programs. “Investors are selling off bonds of major construction firms and looking for safer assets. Huge resources are being funneled into the war and then destroyed, fueling inflationary pressure,” Svitek noted.

The banker also pointed out that a weaker ruble benefits Russia’s attempts to cover its budget deficit. “Additionally, there’s a panic-driven demand for foreign currency. As the exchange rate becomes more volatile, all economic actors, including ordinary citizens, rush to exchange the weakening ruble, further exacerbating the trend,” he said.