BOFIT Viikkokatsaus / BOFIT Weekly Review 2021/39

Oil prices on world markets have climbed by about 20 % over the past six weeks. This week, the price of Brent crude climbed to nearly $80 a barrel. World prices are also up for Russia’s other big export commodities such as ferrous and non-ferrous metals, sawn timber, and fertilisers. The increases have sent Russian export prices to very high levels, some not seen in a decade. The increases reflect the strong recovery of the global economy and demand for certain commodities. With respect to oil, some countries covered under the OPEC+ agreement have also kept their production even below their agreed production ceilings.

While Russian export earnings have naturally been boosted by higher export prices, the ruble’s exchange rate has barely budged. For example, the ruble’s average exchange rate in September was up by less than 1 % against both the dollar and the euro from its August averages. Indeed, the ruble’s exchange rate has also faced factors that put downward pressure on the exchange rate.

The only slight appreciation in the ruble’s exchange rate in September suggests a substantial net outflow of capital from Russia. The situation emerged already in July and August, when export prices were on the upswing and, according to Bank of Russia preliminary figures, the net outflow of private capital from the country rose considerably. Similar situations have also arisen in a couple of earlier years with the ruble’s exchange rate not keeping up with rising export prices.

In addition, foreign currency purchases under Russia’s fiscal rule have returned in recent months to the average pace of 2018–2019. Under the rule, additional oil & gas tax revenues of the federal budget generated when the oil price exceeds the rule’s reference price are converted into forex. These earnings are set aside and later placed in the National Welfare Fund.

Despite the rapid rise in prices of Russia’s main export commodities this year, the ruble has appreciated only slightly


Sources: Rosstat and BOFIT.

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