The Russian ruble is the official currency of Russia, the world's largest country. South Ossetia, which is currently part of the nation Georgia but may join Russia, also uses the ruble. A third jurisdiction that uses the ruble is Abkhazia, which is located in the northwestern corner of Georgia and declared its independence from that nation in 1999.
The Luhansk People's Republic has also switched over to the Russian currency. In September 2015, the rebels who control lands in the Luhansk region of Ukraine announced they were making the ruble the official currency in the territories they occupy. The self-proclaimed Donetsk People's Republic, a territory that exists in eastern Ukraine, uses the Russian currency.
Regulated by the Central Bank of Russia, the ruble has the symbol of ₽ and the currency code of RUB. A ruble is divided into 100 kopeks, which have the symbol of к. The most common exchange rate for the currency is RUB/USD.
History Of The Russian Ruble
The ruble has been the national currency of Russia since the 13th century, making it one of the oldest currencies in Europe. Originally, rubles were pieces of coins cut from the hryvna, the currency used by the Slavic state of Kievan Rus; the Russian term rubit means "to cut or chop," which may explain the origin of the word. Kievan Rus reached its greatest prominence in the 11th century.
During the 14th century, small states began minting rubles as a distinct currency. Between this century and the era of Peter the Great, oval-shaped coins were made by rolling silver into wire and then cutting this wire into sections that all had the same weight. The first copper kopeks came into existence in 1654, when Alexis Mikhailovich, tsar of Russia, attempted to use them as a replacement for silver kopeks.
However, the populace did not accept using the copper kopecks, and this refusal coincided with the so-called "copper revolt" of 1662. Peter I, aka Peter The Great, responded to this challenge by keeping both silver and copper kopecks in circulation for close to 20 years. This move, which was part of Peter's many reforms, was designed to help the people of his country become more comfortable with using copper.
The first Russian rubles emerged in 1704. After Peter's reforms, all rubles were produced with a picture of the reigning emperor or empress.
The Russian government debased the currency under the rule of Peter III, who briefly served as emperor in 1762. During this period, Count Peter Shuvalov cut the metal content of the existing copper coins in circulation by 50% in an effort to generate funds for the Russian government. Pursuant to this plan, the nation's mints doubled the value of 150 million of these coins by having them overstruck, placing a new image and denomination over the old ones.
When Catherine the Great, Peter's III wife, took the throne, she reversed the plan to devalue the copper coinage. She had the coins overstruck once again to return them to their original value.
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Near the end of the 19th century, Finance Minister Sergei Witte placed the ruble on the gold standard. This move helped stabilise the currency, which made it easier for Russia to attract foreign investment.
The stability was only enjoyed for so long, as the Russian empire collapsed in 1917. In the aftermath of this disintegration, a civil war erupted, and in 1922, the Union of Soviet Socialist Republics was created.
Between 1917 and 1923, the ruble plummeted in value, falling from ₽11 per US$1 to more than ₽2 million per US$1 in 1923. The government eventually got the ruble's volatility under control, but it decided to harness a separate currency for foreign transactions and strictly control the exchange rate.
Because the ruble was used sparingly outside the USSR, the official dollar-ruble exchange rate stayed close to one between the Soviet Union's creation in 1922 and dissolution in 1991.  However, many residents of the Soviet Union grew worried that their rubles were depreciating. They took to the streets, forming a black market where the greenback would purchase between ₽30 and ₽33. This was far higher than the official exchange rate, where one ruble was worth 0.56 dollars.
Mikhail Gorbachev, last president of the Soviet Union, decreed in January 1991 that all notes with denominations of ₽50 and ₽100 were void. Because of this abrupt decision, citizens of the Soviet Union went to the state's bank en masse to trade in their notes during the three days they had to do so.
State banks also began offering foreigners and Soviet citizens traveling overseas an exchange rate of ₽27 to US$1 from the previous ₽6 per US$1. Soviets flocked to the US dollar with increasing fervor, which coincided with the ruble's continued freefall. By early December 1991, the dollar was capable of buying ₽100. Later that month, the Soviet Union was gone.
The Russian Federation
The Russian Federation succeeded the Soviet Union, and Boris Yeltsin became the new country's president in 1991. His reforms, which were referred to as "shock therapy," helped spur very high inflation. As a result, the ruble deteriorated and the value of Russians' savings declined. Russia's currency suffered further losses in 1993, falling to ₽1,247 rubles per US$1 amid political turmoil. The government took action to halt the ruble's decline in January 1994, prohibiting the domestic use of foreign currencies. In spite of this move, the ruble plunged 27% during one trading session on October 11.
Struggling with both high inflation and a decline in GDP, the nation plunged into recession. Instability continued for the next few years. By the end of 1995, inflation hit 200%. The ruble kept losing value against the US dollar, reaching ₽5,960 per US$1 in 1997. In January 1998, the Russian government revalued the ruble, setting it to ₽6 per US$1. Roughly six months later in August, the Russian currency plunged once again when the nation's government announced it was defaulting on its debt.
The country kept grappling with economic downturn and high inflation, as GDP fell 4.9% in 1998 and the price level surged 84% that year. Within a month of the default announcement, the ruble fell from ₽6 per US$1 to ₽16 per US$1 in less than one month. Later on, the currency became steady at ₽24 per US$1.
Oil And The Ruble
One major factor that coincided with the ruble's decline was falling oil prices, as the raw material sold for less than $11 per barrel on the New York Mercantile Exchange in December 1998. The nation's troubled economy managed to derive some benefit from the drop in energy prices, because the corresponding depreciation in the ruble helped prompt fuel domestic production. Over the next several years, strong oil prices helped the nation enjoy sustained economic growth. However, when the global financial crisis hit in 2008, both Russia's business conditions and currency hit a speed bump, partially due to falling oil prices.
The nation once again dipped into recession in 2008, and in the following year, its GDP plunged 7.8%. The ruble reached as high as ₽23.4 against the dollar in August 2008, but the exchange rate plunged 35% by January 2009. The government used currency reserves to help manage the currency's drop, referring to this move as a policy of "controlled devaluation." The nation managed to overcome the crisis that afflicted countries across the globe, enjoying 4.5% growth in 2010.
Russian troops entered Ukraine in 2014, seizing several important locations in the Crimean Peninsula early in the year. Many protestors showed their support in both Crimea and in cities throughout Eastern Ukraine, but President Barack Obama warned that Russia's position in the global community would suffer if the country's troops did not withdraw to their bases.
Later that month, Crimea held a referendum in which more than 95% of voters expressed their interest in having the territory secede from Ukraine and join Russia. While Russia vigorously defended the results of this vote, Western leaders dismissed the outcome. Arseniy Yatsenyuk, interim prime minister of Ukraine, derided the vote as a "circus."
The U.S. and European Union proceeded to impose sanctions, which affected many Russian individuals, including those close to Putin. In addition, the penalties applied by the U.S. and EU affected businesses in the world's largest nation.
These sanctions combined with plunging prices for oil, which fell from $100 per barrel to $60 per barrel in 2014, to fuel more volatility in the ruble. Amid these challenges, the currency suffered its worst one-day decline in 16 years, falling 19% in December 2014. On December 16, 2014, Russia's central bank announced a sharp increase in interest rates in an effort to encourage global market participants to keep their money in rubles. While the financial institution used rate hikes and currency purchases, neither of these seemed to stop the ruble's decline.
The world's largest nation continued to suffer economic challenges in 2015, including high inflation and its second year of recession. In mid-December 2015, oil was trading for less than $39, while the ruble had plunged more than 6% during the final quarter of the year.
Ruble Forms Of Currency
Since the early 1700s, the ruble has been issued in the form of coins, bills and notes. The Russian Empire minted the first ruble coin in 1704, but as the state found the number of copper rubles surging, it opted to create assignation rubles in 1769. These were promissory notes that derived their value from the copper currency.
Assignation rubles lost their value, and the government took them out of circulation in 1843. In 1898, Imperial Russia printed a ₽1 bill. When the provisional government took control in 1917, Kerensky rubles, notes carrying a value of either 20 rubles or 40 rubles were released. In 1961, the government issued State Treasury notes, which held denominations of ₽1, ₽3 and ₽5. In addition, State Bank notes with denominations of ₽10, ₽25, ₽50 and ₽100 came into circulation that year. The State Bank produced the next class of notes in 1991, when it issued denominations of ₽200, ₽500 and ₽1,000.
During 1992, the Soviet Russia's government issued one final round of notes bearing "U.S.S.R." Between that year and 1997, all notes released steadily rose in value. The government issued notes worth ₽5,000 and ₽10,000 in 1992, ₽50,000 in 1993, ₽100,000 in 1995 and ₽500,000 in 1997.
In the years following these issues, one notable event was the ruble receiving ₽ as its official symbol. Its use followed a 2013 poll, in which more than 60% of the almost 300,000 participants voted for the Cyrillic letter "P" with a horizontal line.
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Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…