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American and European leaders find themselves scrambling to respond to Russia’s deployment of troops in the Crimean Peninsula of Ukraine. With military action on no one’s wish-list, diplomacy and economic sanctions are the only moves effectively in play.
Secretary of State John Kerry said on CBS’ Face the Nation that he had been on the phone with his counterparts among the G-8 nations.
"Every single one of them are prepared to go to the hilt in order to isolate Russia with respect to this invasion," Kerry said. "They’re prepared to put sanctions in place, they’re prepared to isolate Russia economically, the ruble is already going down. Russia has major economic challenges."
This fact-check zeros in on the value of the Russian ruble. It has declined but partly because that’s what the Russians wanted.
A big drop
In the early part of 2013, the ruble was worth 3.3 U.S. cents. Today, its value has tumbled by 15 percent, to 2.8 cents. A little less than half of that fall came in January as the situation in Ukraine deteriorated.
Here’s the picture over the past year, taken from the currency exchange service XE.com:
There is no question that the violence and political turmoil in Ukraine took a toll on the ruble. Russian banks have about $28 billion in loans in the country. Before the Russian troops moved in, investors were already worried. Last week, two of the largest banks in Russia said they would suspend any new lending in Ukraine.
But the ruble’s decline has deeper roots. In 2010, the Russian Central Bank announced it wanted to get out of the business of setting the ruble’s value on the international market. It had in mind a gradual glide path for the currency’s fall, and in October, it gave the ruble even more leeway to drop further. The country’s economy grew less than 2 percent last year, and it has struggled to keep inflation in check.
"The ruble got pretty over-valued in the big energy boom from 2001-08," said Mark Adomanis, a management consultant and contributor to Forbes. That hurt Russian manufacturing and letting the ruble fall potentially could help.
"With a weaker ruble Russian goods become more competitive on international markets," Adomanis said.
That said, a free fall is not what the Russian Central Bank has in mind. In January, the bank signaled that it would step in to prop up the ruble. But the overall policy remains the same.
Kerry said the ruble is going down, and it is. The Russian currency has lost about 15 percent of its value against the dollar since early 2013. It is not all because of the situation in Ukraine, however, a fact that viewers may not have picked up on by hearing Kerry's statement. The currency’s decline is also part of Russian policy to reduce inflation and make domestic manufacturers more competitive.
There’s a little more going on here than Kerry’s statement would suggest. We rate his claim Mostly True.
CBS, Face the Nation, March 2, 2014
BBC, Ukraine timeline
CNN Money, Ukraine and weak economy slam ruble, Feb. 28, 2014
Reuters, Russia's largest banks halt new loans in Ukraine eyeing political risk, Feb. 26, 2014
XE.com, Ruble-U.S. dollar, March 1, 2014
The Moscow News, Russia moving away from rate control to manage declining ruble, Jan. 30, 2014
Bloomberg, Bershidsky on Europe: Ruble and Lira Plunge, Jan. 24, 2014
Financial Times, Russia takes step toward free-float of rouble, Oct. 9, 2013
Bank of Russia, Bank of Russia foreign exchange policy, Oct. 7, 2013
Global Post, Ruble reverses decline amid free-float doubts, Jan. 30, 2014
Bloomberg, Ruble declines for fifth day on crude oil, Australian growth concern, Feb. 13, 2014
Email interview, Mark Adomanis, management consultant, Booz Allen Hamilton, March 2, 2013
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