The ruble has come off its lows from earlier in the week after the central bank halted all foreign currency purchases for the remainder of the year, but it remains battered—and resources for preventing a further collapse are shrinking.
On Friday, the central bank set the official rate at about 108 to the U.S. dollar. While that’s improved from Wednesday’s rate of 114 on the spot market, that’s still means one ruble is worth less than a penny.
The ruble has tumbled 9% against the dollar since Nov. 21, when the U.S. sanctioned some 50 Russian banks, including Gazprombank, which has emerged as a top linchpin for Russia in currency markets. And for the year to date, the ruble has crashed about 20% against the greenback.
While that could boost Russia’s exports by making them cheaper, it will likely stoke inflation further by making imports more expensive. Even though Western nations have largely cut off trade with Russia, products from China have replaced many imports, and the ruble has fallen against the yuan as well.
Over the summer, Russian businesses and banks were already suffering from a shortage of yuan, which is the most traded foreign currency in the country and a critical lifeline for the economy.
Meanwhile, Russia’s sovereign wealth fund has been tapped repeatedly to prop up the ruble, leaving the Kremlin with less firepower to battle another currency collapse.
Just before the latest crash, liquid assets in the National Wealth Fund were $55 billion as of last month, according to Bloomberg. That’s down from $140 billion before Russia invaded Ukraine in 2022.
Russia can still earn foreign currency by selling its oil and gas, but the shrinking sovereign wealth fund leaves Moscow at the mercy of energy prices, which have been falling amid weakening global demand.
The central bank can also hike benchmark rates further to fight hot inflation while also creating more demand for ruble-denominated assets. But rates are already at a sky-high 21%, meaning additional increases would tighten the screws even more on Russia’s economy.
On Friday, the central bank said no emergency steps are needed to support the ruble, after President Vladimir Putin said Thursday that the situation was under control.
Russia’s currency crisis comes as analysts have predicted that the economy will not be able to sustain Putin’s war on Ukraine past next year. For example, Russian factories can’t make enough key weapons systems to replace battlefield losses, and old Soviet stockpiles are running out.
This story was originally featured on Fortune.com
