How can the Russian ruble become a strong world currency?… That’s an easy one – Russia needs to have a strong economy, whereas currently Russia’s economy is shrinking.
In the short term, stronger Russian economy requires
- Higher commodity prices (oil, metails, and wheat).
- Decent trade relations with Russia’s closest trade partners – the EU and Ukraine.
- Access to major capital markets and investments – European, North American, Japanese (Chinese capital markets have not been nearly helpful and probably won’t be for a while).
The first two seem unrealistic for at least 2-3 years thanks to a major economic slump in China, oversupply of oil, increasing use of alternative energy, and serious damage caused to trade relations by Russia’s aggression in Ukraine.
Oil demand will eventually return, but the supply will also stay high. Russia will not regain trust until its political system changes and its military shrinks.
Access to Capital Markets
Access to capital markets is at least two issues. First, stopping the Western sanctions – this can technically be within 6 months, but won’t be done easily in practice (see the comment on trust above). Second, market’s pricing for Russian debts – it depends on the state of economy, oil prices and other trade sanctions, such as banning high-technology equipment exports for Russia’s oil & gas sector.
I didn’t mention Russia’s weapons exports – they are not as significant to Russia’s economy as commodities, but are also slumping for several reasons (loss of Western markets, loss of high-tech supplies from the West and Ukraine).
Russia Should Restructure Its Economy
In the long term, Russia should restructure its economy to diversify away from oil & gas. However, this is easier said than done, as it will require investments and know-how, which Russia lacks.
It will also require fixing the legal system and the police, which seems difficult without changing the political system and allowing unhindered elections.
Good Relations With Other BRICS
Also, in the long term, good relations with other BRICS countries can help, especially that Indian economy is expected to grow significantly.
However, it’s not clear why India would give preferential treatment to Russia’s much smaller economy. Besides, India’s location complicates tradw with Russia. Brazil seems in economic trouble. China’s growth is less certain than India’s.
So far, nothing new 🙂….
What about unusual scenarios? Russia is trying to produce more oil, which will have a limited impact because this will further depress prices – selling a small amount of oil in excess of supply can lower total revenues. If some large oil exporters decrease output, this can help, but this seems unlikely. Russia is obviously trying to ignite the Middle East, but this is obviously going to fail.
If Russia (or anyone else) invents pracrical cold fusion or another abundant energy source, this will be a disaster for oil profits.
Any other possibilities?….