Victim of disinflation, sanctions and the ‘Chinafication’ of trade: why the rouble unexpectedly strengthened by 25% in 2025 and why this may be long-lasting
One of the main surprises of the Russian economy in 2025 was the sharp strengthening of the rouble, which caused significant difficulties for both Russian exporters and the state budget. The rouble appreciated by 25% against the US dollar, rising to around 80 roubles per dollar, while market participants had expected it to be above the 100-rouble benchmark by the end of the year.
The strengthening of the rouble was not prevented even by the decline in global oil prices and an even sharper fall in the price of Russia’s Urals crude relative to Brent, although in the past such dynamics almost inevitably led to rouble depreciation. The explanation has nothing to do with a reduced dependence of the Russian economy on oil.
The main speculative factor behind the rouble’s strengthening in 2025 was the policy of disinflation. In order to restrain price growth linked to massive financing of the war and the defence sector, the Russian authorities kept the refinancing rate at an extremely high level, which translated into high deposit rates. Whereas at the end of 2024 inflation fuelled demand for foreign currency and weakened the rouble, in 2025 the disinflation policy turned the rouble into one of the most attractive investment vehicles.
In addition to this speculative factor, which is linked to the distortions of a semi-militarised economy, there is also a longer-term structural factor related to its closed nature, namely the absence of channels for capital outflows. As a result, foreign currency revenues are effectively 'trapped' within the Russian economy. More broadly, unlike in previous periods, investment flows in both directions have ceased to be a factor shaping supply and demand in the domestic foreign exchange market.
In this situation, current external trade conditions have a much greater influence on exchange rate dynamics. In particular, the twofold reduction in car imports from China in 2025 led to a fall in demand for yuan, which was directly reflected in the market exchange rate of the rouble.
Thus, a strong rouble reflects the new realities of Russia’s semi-closed and semi-militarised economy and, in the view of government officials, is likely to remain in place for a long time, reducing the competitiveness of Russian exports and contributing to the entrenchment of its 'isolation'.
The rouble as a victim of disinflation...
One of the main and most unexpected developments in the Russian economy in 2025 was the sharp strengthening of the rouble, which persisted throughout the year and caused considerable difficulties, especially towards its end, for both Russian exporters and the state budget. The rouble’s appreciation came as a major surprise to the market. At the beginning of the year, the Central Bank’s consensus forecast pointed to a level of 105 roubles per dollar, while the Ministry of Economic Development expected it to weaken to 98.7 roubles by the end of the year. A similar benchmark of 96.5 roubles was built into the 2025 federal budget. The actual deviation from this assumption meant that budget revenues in 2025 were, according to some analysts, more than 1 trillion roubles lower, a shortfall that had to be covered by additional borrowing.
From the beginning of 2025, the official rouble exchange rate against the dollar, as set by the Central Bank, strengthened by 25%. While at the end of 2024 the dollar stood at 101.7 roubles, by 6 December 2025 it had fallen to 76 roubles, although in the final two weeks the dollar recovered part of this decline. The exchange rate was last at such low levels in the first half of 2023.
Official exchange rate of the rouble against the US dollar and the yuan, 2023–2025
The main phase of the rouble’s appreciation occurred in the first two quarters of 2025, although the market expected the dollar to regain lost ground over the course of the year. This scenario appeared all the more likely given that global oil prices were trending downwards throughout the year, from about $75 per barrel of Brent at the end of 2024 to $60–65 by the end of 2025. The average price of Russia’s Urals crude, according to estimates by the Ministry of Economic Development, fell below $45 per barrel in November 2025, compared with almost $64 at the end of the previous year. In earlier periods, such dynamics almost inevitably led to rouble depreciation. However, in the semi-militarised and semi-closed Russian economy of the new era, this relationship has ceased to operate. The occasionally voiced argument that this reflects a reduced dependence of the Russian economy on oil is hardly convincing, since in 2012–2021 oil and gas revenues accounted for 63% of total exports, and in 2022–2024 their share remained unchanged.
The supply of foreign currency on the domestic market did indeed decline in 2025. As a result of lower oil prices, total sales of foreign currency revenues by exporters over the first 11 months of 2025 amounted to $92.5 billion, or an average of $8.4 billion per month, which is almost 30% lower than in the same period a year earlier, according to data from the Central Bank. This figure would have been even lower had exporters repatriated a smaller share of their revenues, as they did in previous years. In 2023, average currency sales amounted to 77% of export revenues, in 2024 to 90%, and in 2025, based on data currently available for nine months, to 95%. According to the Central Bank, in June to August the ratio of net currency sales to export revenues even exceeded 100%, meaning that currency accumulated in earlier periods was being brought back into the country. Only in September did the ratio fall below 80%, because, as Central Bank analysts explained, several companies temporarily reduced sales in order to settle obligations to Russian banks. Thus, although exporters were selling a larger share of their revenues on the domestic market, the supply of foreign currency was shrinking, while the rouble nevertheless continued to strengthen.
This exchange rate dynamic, which ran counter to fundamental factors, was driven partly by structural but above all by cyclical factors. The most important of these was the high level of rouble deposit rates. According to the Central Bank, in December 2024 the weighted average rate on deposits of non-financial corporations with maturities of more than one year exceeded 23% per annum and remained around 20% until May 2025, before falling to about 15% by the autumn. This not only encouraged exporters to convert a larger share of their foreign currency earnings into roubles and keep them in the country, but also reduced domestic demand for foreign currency. Total demand from legal entities, excluding banks, fell by 27% in January to November 2025, from 36.5 trillion to 26.6 trillion roubles, or on average from 3.3 trillion to 2.4 trillion roubles per month, according to the Central Bank's November Financial Market Risk Review. In June 2025, demand dropped to 1.7 trillion roubles, the lowest level in the past three years.
In other words, while at the end of 2024 rising inflation fuelled demand for foreign currency and weakened the rouble, the disinflation policy pursued in 2025, centred on an exceptionally high Central Bank rate, generated enormous demand for roubles across the economy and turned the rouble into the most attractive investment instrument. Demand for credit remained relatively high, despite lending rates for maturities of up to one year staying above 20% until August 2025. The high policy rate is the main factor supporting the rouble at elevated levels, according to former Central Bank deputy chairman and Higher School of Economics professor Oleg Vyugin. He believes the weakening of the rouble should be expected only as the key rate approaches 10%.
...as well as sanctions and the ‘Chinaisation’ of foreign trade
In addition to the main speculative factor behind rouble appreciation, namely the high yield on rouble-denominated assets, a number of structural features of Russia’s sanctions-hit economy have also been having a similar effect.
First, capital outflows have almost entirely ceased. Previously, foreign companies repatriated part of the profits earned on the domestic market, while Russian companies with profit centres in other jurisdictions invested part of their income abroad. These channels of capital outflow are now closed. Transactions related to the exit of foreign businesses from Russia, which generated domestic demand for foreign currency in previous years, have also largely stopped, notes Anton Tabakh, chief economist at Expert RA. The absence of capital outflow channels means that export revenues are effectively trapped inside the country. As Sergei Shvetsov, head of the supervisory board of the Moscow Exchange, put it, 'today we are swelling with foreign currency that previously simply flowed abroad and was invested there, whereas now it stays inside the country and puts pressure on the rouble exchange rate'. Put more broadly, unlike in earlier periods, investment flows in both directions have ceased to be a factor influencing foreign currency supply and demand on the domestic market. Both inflows and outflows previously involved conversion operations, the need for which has now disappeared.
Finally, Vyugin notes that the Central Bank is currently using a standard market-based mechanism for exchange rate formation. The rate is determined by interbank foreign exchange transactions, primarily in yuan. As a result, demand for yuan from economic agents directly affects the dollar exchange rate, increasing the influence of developments in Russia–China trade on the rouble.
According to non-disaggregated data from the Federal Customs Service, over the first 10 months of 2025 Russian exports to China declined by $15 billion, or 4%, compared with the same period in 2024, from $355 billion to $340 billion. A sharp fall in oil and gas exports, from $219 billion to $187 billion, a decline of $32.3 billion or 15%, and in food exports, down $3.6 billion, was partly offset by growth in exports of metals, up $9.7 billion, chemical products, up $5.2 billion, and machinery and equipment, up $4.4 billion. The contraction in imports was more moderate, amounting to $5.5 billion or just 2.4% year on year. At the same time, food imports rose markedly, by $4.4 billion or 14%, a development that can be attributed to the strengthening of the rouble, which improved the competitiveness of imported goods. The main decline in imports was recorded in the category of machinery and equipment.
Key indicators of Russian exports and imports for January–October 2024 and 2025, in billion US dollars
| Exports | Imports | |||
| 2024 | 2025 | 2024 | 2025 | |
| Total | 355 | 339,8 | 229,9 | 224,4 |
| including: | ||||
| Mineral products | 218,9 | 186,6 | 3,8 | 3,2 |
| Metals and metal products | 50,7 | 60,4 | 14,7 | 14,7 |
| Food and agricultural raw materials | 35,1 | 31,5 | 30,6 | 35 |
| Chemical industry products | 22,8 | 28 | 43,7 | 44,8 |
| Machinery, equipment, transport vehicles and other goods | 17,1 | 21,5 | 118,4 | 108,1 |
| Other | 10,37 | 11,69 | 18,7 | 18,73 |
| | ||||
| China | 108,1 | 101,2 | 94,2 | 82,1 |
Sources: Federal Customs Service of the Russian Federation; General Administration of Customs of the People's Republic of China
From a geographical perspective, virtually the entire contraction of Russian imports in 2025 was linked to China. While Russian exports to China fell by $7 billion compared with the previous year, a decline of 6%, imports dropped by $12 billion, or 13%. As a result, Russia’s trade surplus with China increased from $14 billion to $19 billion. Within the structure of Chinese exports, the largest decline was concentrated in a single category, transport vehicles (Section XVII, Chapter 87 under the Chinese customs classification). Shipments to Russia in this category fell from $21.5 billion in January to October 2024 to $10.2 billion in the same period of 2025, more than halving. The main driver of this contraction was the recycling levy, which prompted a pre-emptive surge of Chinese car imports into Russia at the end of 2024, followed by a collapse in 2025. In effect, this meant that demand from Russian importers for yuan should have fallen by 13% compared with the previous year.
Finally, an additional factor exerting pressure on the rouble towards the end of the year was the sale of foreign currency and gold both by the Ministry of Finance, under the fiscal rule, in the amount of 5.6 billion roubles per day, and by the Central Bank, through the mirroring of operations with National Wealth Fund resources from 2024 and the first half of 2025, at 8.94 billion roubles per day. As a result, between 5 December and 15 January a total of 320 billion roubles of foreign currency will be sold, equivalent to about $4 billion, roughly 50% of exporters’ aggregate monthly sales.
However, such operations tend to lead only to short-term exchange rate adjustments, whereas the systemic factors described above shape the long-term role of hard currencies in Russia’s semi-closed economy. It is therefore no coincidence that the government, Finance Minister Anton Siluanov and Economy Minister Maxim Reshetnikov, has urged businesses to learn to operate with a strong rouble.