The exchange rates of USD/RUB and EUR/RUB are not primarily influenced by the market due to sanctions affecting the Rouble’s connection to fundamentals. Despite this, long-term pressures, such as sanctions on energy and declining export revenues, suggest a gradual depreciation of the Rouble. Commerzbank’s FX analyst notes domestic financial stress will also contribute to this trend.

Economic stress indicators are increasing, with the economy cooling and a discrepancy between a recovering services sector and a contracting manufacturing sector. The Manufacturing PMI dropped to 48.0 in October, affected by decreasing new orders and weak domestic demand. While some forecasts predict a recovery, Russia’s growth rate is expected to remain around 1%.

Outlook for Russian GDP Growth

The think-tank CMASF lowered its 2025 GDP growth forecast to 0.8-0.9%. This reflects the adverse effects of tight monetary policy. The central bank faces a challenge; easing monetary policy could risk inflation, while keeping a tight policy might hinder economic recovery. Combined with exposed economic weaknesses and ongoing sanctions, a weaker Rouble is anticipated. The forecast for USD/RUB and EUR/RUB is to rise steadily through 2026 and 2027.

It seems the fundamental weaknesses in the Russian economy are becoming more visible, pointing towards a steady depreciation of the rouble. The currency has been largely insulated from market forces, but underlying pressures from sanctions and falling export revenues are now intensifying. These factors create a compelling case for a weaker rouble in the months ahead.

We are seeing clear signs of this economic stress mounting. The latest flash reading for Russia’s Manufacturing PMI for November registered 47.8, continuing its contraction and signaling a further decline in new orders and domestic demand. This data reinforces the view that the economy is cooling despite official projections of stable growth.

Impact of Energy Export Revenues

The pressure on the country’s finances is significant, with recent Ministry of Finance data showing that energy export revenues for the third quarter of 2025 fell by over 18% year-on-year. This is a direct result of tighter sanctions enforcement and a persistent discount on Urals crude, which has been trading more than $25 below Brent. This structural decline in income directly undermines the rouble’s value.

Given this outlook, we should consider positioning for a higher USD/RUB exchange rate. Buying USD/RUB call options with expirations in the first and second quarters of 2026 offers a way to profit from the expected depreciation while defining our maximum risk. This strategy capitalizes on the view of a gradual, upward trend in the currency pair.

For a more conservative approach, a bull call spread on USD/RUB could be implemented. This involves buying a call option and simultaneously selling another call with a higher strike price, reducing the initial cost of the position. This is well-suited for a scenario of steady, rather than explosive, rouble weakness.

We have seen this dynamic before, looking back at the period between 2014 and 2016 from our perspective today in 2025. During that time, a combination of sanctions and a sharp drop in oil prices led to a prolonged and significant depreciation of the rouble. The current environment, with its structural revenue shortfalls, echoes the pressures from that era.

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