The ruble may go down – and that's exactly the point. An expert on Putin's clever ploy [ANALIZA]
The meeting was secret, but its participants later commented quickly, calling it difficult and groundbreaking. We do not know the details of these meetings, but Finance Minister Anton Siluanov announced that, as a result of them, the government intends to propose a revision of the “cut-off price” – a calculation indicator that determines the proportion of the distribution of oil and gas revenues between the current financing of budget needs and the supply of the National Welfare Fund. According to his announcement, this will take place “in the next few weeks.”
Commentators and experts reacted to these reports immediately. Some opinions came down to the statement that the liquid part of the National Welfare Fund had basically ceased to exist a long time ago, and the government simply had nothing to spend – hence the urgency with which the topic was addressed.
Since things easily happen in Russia that could not happen under any circumstances in any other country in the world, I wouldn't rule out any of these scenarios. However, I would like to focus not on what someone thinks, but on what logically follows from the information we actually heard..
Analysts immediately calculated that every dollar by which the cut-off price in the budget rule is reduced relieves the Ministry of Finance from the need to pay from the National Welfare Fund from 113 to 136 billion rubles (approx. PLN 5-6 billion). This means that once this indicator is brought down to a realistic level, the use of the fund's resources will basically cease.
Of course, this will not cause the budget to suddenly fill with money, but it will trigger another process – a very likely weakening of the ruble exchange rate. Recently, the sale of currencies from the National Welfare Fund has been an important element of currency supply on the market.
It is worth recalling that the ruble exchange rate remained relatively stable in conditions in which the authorities did not even require exporters to sell part of their foreign currency proceeds, and from August 2025 they no longer even ordered their repatriation to the country.
Russian central bank in Moscowhank5/Getty Images
The budget for 2026 was constructed assuming an average oil price of USD 59. per barrel (approx. PLN 235) and the average exchange rate of 92 rubles per dollar. This meant that a barrel of oil should cost approximately 5,440 rubles (approx. PLN 235).
It is not difficult to calculate that at the price of oil at USD 45-47. per barrel (approx. PLN 180–190), such a price in rubles appears at the dollar exchange rate of 115–120 rubles (approx. PLN 5).
This is not an unbelievable scenario at all. Such a rate appeared already at the end of November 2024, and the CEO of Sberbank, German Gref, said quite reasonably in a recent interview that he saw no reason for the current quotations to continue.
It must be admitted, however, that most analysts – including leading specialists of the largest Russian banks – present much more cautious forecasts, ranging from 85 to 90 rubles per dollar, speaking rather of “weakening without a collapse”. However, such a scenario seems to make little sense.
In other words: if we remember what we heard from officials – the Ministry of Finance's desire to reduce the cut-off price and the Bank of Russia's commitment to the policy of slowly reducing interest rates – then a decline in the value of the ruble seems virtually inevitable.
The conclusion becomes even more obvious when we remember that high interest rates were one of the main factors supporting the Russian currency. Placing funds on ruble deposits was one of the most profitable investments in the world in 2025 – if you don't count gold.
And here we come to the most interesting question: If devaluation seems likely, how big could it be?
The scenario that Moscow is afraid of
I could be wrong, of course, but it will most likely be violent. We have already seen such phenomena in Russia in 2009 and 2015, as well as, for example, in Azerbaijan in 2015 and in Uzbekistan in 2017.
Devaluation can be triggered by the announcement of a new cut-off price – which will become a clear signal for investors of the government's new financial expectations.
However, budget cuts are the scenario that the Kremlin most wants to avoid. Devaluation only makes sense if it can prevent it.
Firstly, a drop in the exchange rate would increase revenues from oil and gas compared to the January level by at least 40%, i.e. by 150-170 billion rubles per month (approx. PLN 6-7 billion), which would amount to approximately 1 trillion rubles (approx. PLN 65 billion) by the end of the year.
It is very possible that the exceptionally timely attack by the United States and Israel on Iran will not raise oil prices to $100. per barrel (approx. PLN 400) or higher – as some Russian commentators began to forecast – but at least it will end the prolonged pessimism on the oil market.
I am reminded of the words of experts who, in 2003, thought the American invasion of Iraq was a guarantee that oil prices would return to $10. per barrel (approx. PLN 40). As it turned out, the reality was completely different.
It is too early to talk about a new wave of petrodollars, but the new trend is likely to reduce the discount at which Russian Urals crude is sold on Asian markets today and solve supply problems that are currently blocking tankers storing over 150 million barrels of Russian oil.
These two factors alone – if the discount decreases by $7-9. per barrel (approx. PLN 28-36) – may bring another 700-800 billion rubles (approx. PLN 30-35 billion) to the budget by the end of the year.
The second consequence will be the inevitable increase in prices of imported goods. Most likely, it will not be fully proportional to the weakening of the exchange rate, because internal demand has its limits.
However, the increases will translate into higher tax revenues – primarily from VAT, which is practically impossible to avoid. The import part of this tax accounts for up to 35%. all budget revenues, therefore the Ministry of Finance can count on an additional 600–700 billion rubles (approx. PLN 26–30 billion) in the second–fourth quarter.
As a result, the ruble was devalued by 30-35%. may contribute at least 4 trillion rubles (approx. PLN 174 billion) to the budget. Moreover, a sharp drop in the exchange rate often creates conditions for its subsequent stabilization or even partial recovery, which helps to extinguish inflation expectations.
The most interesting thing, however, is that if the devaluation takes place in the coming months, the government may avoid a significant increase in spending this year.
“Both would be very painful for the Kremlin”
If the devaluation takes place before the summer, it will also be possible to abandon the indexation of pensions and salaries of public sector employees, planned in mid-year.
The drop in the exchange rate will also help exporters and make it easier for them to settle accounts with Russian Railways, which is currently in a difficult financial situation.
The authorities may take this opportunity to come up with another “windfall profits tax”, similar to the one from 2023, although it is unlikely to be introduced this year.
In other words, a significant shift in the exchange rate is practically the only measure that can replace real budget cuts. And these seem almost impossible in the current conditions, because they would require a nominal reduction in spending either on the war or on the so-called protected budget lines – both of which would be very painful for the Kremlin.
Russian recruits (stock photo)Associated Press/EastNews
However, one more thing should be noted: devaluation not only reduces the real value of current budget expenditure, but to an even greater extent – taking into account future revenues – reduces the real burden of public debt.
And it is precisely exceeding a certain level of debt in relation to GDP that the Kremlin is particularly afraid of.
There is nothing more convenient for the government than to repay this debt in a few years with heavily devalued rubles – formally without violating any obligations. In the current conditions, devaluation looks not only like a solution for the Kremlin, but – which may sound paradoxical – also a relatively acceptable solution for society.
Since the beginning of the war, even according to official data, inflation has already exceeded 40 percent, and the price increase felt by residents was probably more than twice as high. Meanwhile, the dollar exchange rate practically did not increase during this period.
If data from the Bank of Russia are to be believed, the country's cash reserves in foreign currencies exceed USD 93 billion. (approx. PLN 370 billion). The increase in the purchasing power of people with these means can at least partially compensate for the reductions in spending of those who devote all their income to current consumption.
It is also worth remembering that devaluations almost never cause serious social protests. People perceive them as the result of objective circumstances that affect everyone equally.
Eleven years of relative exchange rate stability therefore look like a kind of boundary, after which Russia has been moving to a new exchange rate “plateau” in recent decades – this was the case in 1998–1999, 2008–2009 and 2016–2018. Therefore, achieving another balance would not be a particular surprise to anyone.
To sum up: on the one hand, the announcements of the Russian financial authorities regarding actions in connection with the budget situation should be treated as a signal of serious economic changes that may have significant consequences.
On the other hand, the effects of these changes may turn out to be much less catastrophic and groundbreaking than many people think today.
