Plunging Russian Ruble Puts Pressure on Putin

At WSJ, "Plunging Ruble Unsettles Russians, Poses Test for Putin: Russians Rush to Buy Big-Ticket Items and Foreign Currencies as Ruble Hits Record Low":

MOSCOW—As Russian President Vladimir Putin has ratcheted up the conflict with the West for most of the year, the economic fallout on ordinary Russians has been limited.

Suddenly, though, the plunging ruble is reawakening fears of rising prices and the kind of financial crisis Mr. Putin has sought to put behind his country. As the ruble hit a record low, falling as much as 20% against the dollar Tuesday, Moscow residents rushed to buy electronics and other big-ticket items and drained rubles from ATMs to swap them for dollars and euros—signaling a new feeling of vulnerability among Russians and a fresh challenge to their leader.

From St. Petersburg to Siberia, money changers ran out of foreign currency and were raising exchange rates. Sberbank , Russia’s state savings bank, and Alfa Bank, Russia’s largest private lender, said they were experiencing a rush for dollars and euros.

“The demand is enormous. People are bringing piles, huge piles of cash. It is madness,” said Kamila Asmalova, a manager at a Moscow branch of Sberbank. The branch ran out of foreign currency by 2 p.m., she said.

Lanta Bank, a midsize Moscow lender, said its foreign counterparts would be unable to send foreign currency Wednesday as aircraft that typically transport cash are full.

Apple Inc. said it halted online sales in the country because of the ruble’s volatility, and IKEA announced it would raise prices there.

The ruble’s continued fall despite the Russian central bank’s move to raise interest rates to 17% rippled across global markets Tuesday, fueling a selloff in emerging market currencies and stocks. In the U.S., the turbulence was more muted, as the Dow Jones Industrial Average closed down 0.7%. The yield on the 10-year Treasury, a traditional haven, fell to 2.07%, its lowest closing level since May 2013.

Abroad, Russia’s crumbling currency—driven by sanctions and eroding oil prices—raises the threat of a currency market contagion, particularly for emerging economies facing headwinds, such as Turkey and Indonesia.

At home, economists say the Russian central bank’s rate gambit is certain to push the country’s faltering economy into recession by raising borrowing costs. Even before the rate increase, the central bank estimated the economy could contract as much as 4.7% next year if oil remains around $60 a barrel. On Tuesday, Economy Minister Alexei Ulyukayev said that the government would introduce some “regulatory measures” on the foreign-exchange market, but that it wasn’t discussing any capital-control measures.

The big question is whether Russia’s economic troubles will turn into a real political challenge for Mr. Putin, whose approval ratings remain above 80% and who retains tight control over politics and the economy...

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