The ruble has reached its highest level in more than three years. What at first glance seems like good news for the Kremlin is actually a big burden on Putin's military economy. ARD explains why.
A strong currency is usually considered a sign of economic power. In the case of Russia, however, things are more complicated.
At the end of May, the Russian ruble reached its highest level against the dollar and the euro in more than three years. For Moscow, however, this is only a positive sign at first glance. The strong ruble is becoming an increasingly big problem for the Russian military economy, writes the German public media ARD.
Why has the ruble strengthened?
Recently, the exchange rate was around 71 rubles to the dollar. For comparison: at the beginning of 2025, one dollar was exchanged for 115 rubles. Since mid-March alone, the Russian currency has appreciated by more than 20 percent.
The main reason for its appreciation is distorted foreign trade: Russia sells more abroad - mainly oil, gas and other raw materials - than it imports. This is due to the fact that the Russian economy is stagnant and domestic demand is weak. At the same time, many channels for capital outflows remain closed, the German publication points out.
How the war in Iran supports the ruble
The war in Iran has further exacerbated this imbalance: since then, oil prices have risen significantly. In order to overcome the shortage of crude oil and refined products, the US also eased its sanctions against Russia in March, and in mid-May the exemption was extended for another 30 days.
This allows the sale of Russian crude oil and Russian petroleum products already on ships. The easing of sanctions also affects ships from the Russian shadow fleet, ARD specifies.
Oil and gas revenues are growing significantly
Against this background, Russia's revenues from crude oil exports have seen a significant increase in recent times. According to calculations by the Center for Research on Energy and Clean Air (CREA), in April they increased by 44 percent compared to the same month last year. And according to the website MarketScreener, which cites Reuters, Russia's oil and gas revenues in May are expected to grow by 39 percent compared to last year - to about 700 billion rubles.
Exporters suffer from the strong ruble
For Russian exporters, however, the strong ruble is a problem: Russian goods such as grain, fertilizers, steel or metals become more expensive on the world market - and thus become less competitive.
A strong currency acts as a tax on exports, as it makes domestically produced goods more expensive for foreign buyers. At the same time, it subsidizes imports, as foreign products become cheaper for the domestic population. "We see that the exchange rate is simply stifling Russia's grain trade," commodities analyst Masha Belikova of Fastmarkets told the Financial Times.
Less rubles for Putin's piggy bank
The strong ruble is a delicate issue not only for the Russian economy but also for the state budget. The reason is that the Russian state pays for defense spending, salaries and social benefits in rubles. At the same time, Russia receives a large part of its export revenues in foreign currencies, such as Chinese yuan.
To fill the holes in the budget, the Ministry of Finance is forced to sell gold reserves, as well as its yuan reserves. The buyer of these assets is the Bank of Russia. In return, the central bank sells foreign exchange reserves in the same amount on the domestic market.
These so-called "mirror transactions" further strengthen the ruble – and thus intensify the problems for the Russian state and economy. Ultimately, the strong ruble is more of a curse than a blessing for Moscow, ARD also points out.