Faltering Ruble Makes Dollars Scarce

MTA sign displaying falling ruble exchange rates in Moscow on Wednesday.
Just two weeks ago, Channel One television ran a long segment in its weekend news roundup ridiculing people who believed "rumors" of a ruble devaluation, comparing them to pensioners stockpiling 20-kilogram bags of salt on speculation of a future shortage. The report then accused a Georgian web site of spreading the rumors in a malicious campaign of "black PR."

And when the Central Bank said Tuesday that it would let the ruble weaken, the state-owned channel breezed through the news in 20 seconds, referring to a "widening of the trading corridor," a phrase unlikely to be understood by many Russians.

But memories are still fresh of the 1998 crash, when the ruble lost 71 percent of its value to the dollar, and the rapidly changing rates on street exchange boards appeared to be catching people's attention.

"We haven't had any dollars since [Tuesday]," said a cashier in a bank branch on Novokuznetskaya Ulitsa. A bank on Pyatnitskaya Ulitsa only had $3,000 left by 11 a.m., a cashier said Wednesday, and was selling them at 28 rubles.

Across the street, an exchange point only had $500, and a booth in a jewelry store next door refused to accept rubles because "the rate is changing" and said to come back later.

The managed ruble stayed mostly steady against its basket of 55 cents and 45 euro cents Wednesday, after the Central Bank on Tuesday increased the trading band by 30 kopeks on both ends, meaning that it could fall to 30.71 against the basket from the previously understood lower limit of 30.41.

The dollar has been gaining against the ruble since a post-1998 historic low of 23.1 rubles in mid-July. On Wednesday, few banks were selling dollars at less than 28 rubles, while the official rate was 27.34. In Moscow currency trading Wednesday evening, the ruble had fallen to 27.56 against the dollar -- a 2 1/2-year low and weaker than Thursday's official rate of 27.47.

Government officials had also repeatedly denied the possibility of devaluation for at least a month, knowing that panic could leave the already struggling banking system completely dry.

The refrain changed slightly on Friday, however, when the Kremlin's top economic adviser, Arkady Dvorkovich, said "sharp devaluation" would not happen. Then on Monday, Central Bank Chairman Sergei Ignatyev said the bank might "increase the flexibility" of the ruble's exchange rate, sending it tumbling before the official announcement.

In a Levada Center poll completed Oct. 20, just more than half of Russians said they preferred to keep their savings in rubles, although that number could now start falling, said Natalya Bondarenko, a Levada sociologist.

"Only 20 percent of Russians have any kind of savings, so the tendency to convert large amounts of money into foreign currencies will be limited," Bondarenko said. "Many people who have been saving money will choose to spend it right now, purchasing whatever it was they were saving for."