US sanctions on Gazprombank spark ruble collapse

The Central Bank of Russia (CBR) decided on December 20, 2024, to maintain interest rates at 21%. This move marked a shift from its recent inflation-fighting measures, as the CBR raised rates from 19% to 21% in October 2024, the highest level since the start of the war in 2022.

British intelligence reports growing criticism from Russian businesses over high interest rates. However, inflationary pressures are likely intensifying, partly due to the ruble's recent depreciation.

In November 2024, the ruble fell to its lowest level against the US dollar since the start of the war in Ukraine in 2022, reaching 114 per dollar.

The report stated that the ruble's collapse was almost certainly triggered by the announcement of sanctions against Gazprombank, followed by economic statistics revealing ongoing overheating in Russia's economy.

In response, the CBR announced a halt to foreign currency purchases until 2025. Despite this, the ruble remained above 100 per dollar until December 20, leading to wide market expectations of further rate hikes.

The UK Ministry of Defence notes that the decision by the Russian Central Bank to maintain interest rates at their current level will likely exacerbate economic imbalances due to the inflationary effects of the ruble's depreciation, labor shortages, and high government spending.

US sanctions

On November 21, the United States imposed new sanctions on Russia's Gazprombank. President Joe Biden is stepping up measures to punish Moscow for its invasion of Ukraine before he leaves office in January.

The sanctions prevent the state-controlled lender from conducting any new energy-related transactions involving the US financial system.

Read more about the collapse of the ruble in the material by RBC-Ukraine.