The Rouble has regained almost all of its value following an announcement by the Central Bank of Russia that it would fix its currency price for buying gold.
Set at 5000 Roubles per gram, this latest move follows the announcement in March that Roubles would only be accepted as payment for Russian gas exported to the West.
Rumour has it that the Rouble only payment policy may be expanded to include oil and many other Russian commodity exports (wheat, nickel, aluminium, neon, etc) in the near future.
The desired effects of these changes would be to shore up the credibility of the Rouble and increase the need for foreign countries to buy and hold roubles in their strategic reserves, however, the geopolitical ramifications should not be overlooked. Countries that have attempted to sell oil in anything but US dollars in the past have incurred Americas wrath and the US will undoubtedly do whatever it has to in order to protect the petrodollar. Given the current situation in Ukraine and the crushing sanctions imposed on Russia by the West, annoying America and potentially weakening the USD, albeit likely only in the short term, will be seen as an added bonus at the Kremlin.
Whilst the gold pegging and other policy changes have helped to steady the Russian economic ship and its currency (the Rouble has almost bounced back to its pre-sanctions value), it is likely to be short lived.
Western governments are determined to find alternative sources of gas and oil and end their dependence on Russian energy exports thus reducing the need for them to buy or hold Roubles.
The continued success of this strategy will very much depend on how much gold Russia can exchange for Roubles (if war costs increase and further sanctions bite will they be able to convert the Roubles back to gold?), how many countries are able and/or willing to find alternative supplies of the commodities that Russia currently provides them with and the duration of their current engagement in Ukraine?
As long as Russia can find buyers for its gas, oil and other commodities and as long as these buyers are prepared to pay in gold or Roubles, the Russian economy will continue to be propped up, however should the demand for Russian exports decline dramatically then so too will the Rouble and the entire Russian economy.