You are doing the right thing by wanting to open a dollar account. Over the course of history, the Russian ruble has been depreciating against hard currencies, and a dollar deposit will protect capital from devaluation.
As for the default of the Russian economy, there are no prerequisites for this, despite the difficult global situation. If we consider the scenario hypothetically, then this situation is from the category of force majeure, and it is impossible to predict its consequences in advance.
Let’s take a closer look at what devaluation, inflation and default are.
What is devaluation
Devaluation is the process of depreciation of a national currency in relation to hard currencies, such as the dollar. Usually, we have to talk about devaluation in the context of developing economies, including the Russian one.
Developing economies are usually commodity-based, meaning they export goods with low added value. This is a model with a weak margin of safety: it has low margins, geopolitical risks, and dependence on consumer markets.
Thus, in the conditions of a slowdown in the global economy, when demand for raw materials falls, developing countries suffer first. Therefore, central banks often devalue the national currency - then for one dollar received from exports, the economy will receive more national currency. The currency is devalued for various reasons: to support their own exporters, reduce dependence on imports, stimulate domestic production. For example, China periodically devalued the yuan as part of a trade war to make exported goods cheaper and bypass US import duties.
If we look at the historical dynamics of the dollar-ruble currency pair, the latter depreciated by 4192% from September 1994 to January 2025 — from 2.4 to 103 ₽ per dollar. At the same time, in March 2022, at the peak of panic, the dollar exchange rate reached 121 ₽, and the ruble depreciated by 4863%. True, then the ruble strengthened almost twice, and investors who bought the dollar suffered losses. Nevertheless, the historical trend of depreciation has not been broken.
Devaluation of the ruble from late 1994 to January 2025
Other emerging markets have also weakened against the dollar over time. For example, an index of 10 emerging currencies tracked by JPMorgan has depreciated against the dollar by more than 40% between 2011 and 2020.
The weakening is wave-like, with periodic impulses of strengthening of the basket of emerging currencies against the US dollar. Source: Wasatch Global Investors The weakening is wave-like, with periodic impulses of strengthening of the basket of emerging currencies against the US dollar. Source: Wasatch Global Investors The weakening process is noticeably amplified during periods of crisis, when capital flows out of emerging markets. Thus, in the pandemic year of 2020, when the global economy went through a recession, only three currencies showed moderate strengthening against the dollar: the Taiwan dollar, the Chinese yuan and the Israeli shekel. . And among the outsiders were the ruble, the Argentine peso, the Turkish lira and the Brazilian real, which lost more than 20% against the dollar.
And in 2024, the dollar strengthened not only against emerging market currencies, but also against many hard currencies. In particular, it reached parity with the euro.
Currency dynamics in 2024
Dollar (USD) +7.1%
British Pound (GBP) -1.7%
Mexican Peso (MXN) -2%
Chinese Yuan (CNY) -2.8%
Indian Rupee (INR) -2.8%
South African Rand (ZAR) -3.7%
Euro (EUR) -6.2%
Swiss Franc (CHF) -7.3%
Canadian Dollar (CAD) -7.9%
Australian Dollar (AUD) -9.1%
Japanese Yen (JPY) -10.3%
New Zealand Dollar (NZD) -11.4%
Russian ruble (RUB) -18.6%
Brazilian Real (BRL) -21.6%
Consequences of inflation
Inflation is an increase in the prices of goods, as a result of which the purchasing power of money falls. It should also be taken into account when planning capital for years to come.
Typically, the inflation rate is a few percentage points per year, but over strategic periods of time, it can significantly weaken your capital. For example, $1 in 1923 is equivalent in purchasing power to $18.45 in 2025. Thus, for the same product you now have to pay almost 18.5 times more than a century ago. As for the current inflation rate, by the end of 2024 it will be about 9.7% in the Russian Federation, and 2.7% in the United States.
The decline in the purchasing power of the dollar from 1923 to 2025. Source: Official Data It is also worth considering that economies can periodically enter a deflationary spiral, when inflation falls to zero and negative values. For example, this happened during the Great Depression in the United States in 1927-1933. This is accompanied by a reduction in key rates by central banks: rates on bank deposits tend to zero and even become negative. We observed this in 2016-2021 in many developed countries, mainly in the European Union.
As for dollar deposits in Russia, they did not yield much until 2022: around 1% per annum. And since 2022, due to the worsening geopolitical situation, working with “unfriendly” currencies has become more complicated. At the same time, it has become possible to buy new currencies , such as the yuan and the Arab dirham. The latter is tied to the US dollar exchange rate and acts as an alternative to it.
Inflation since 1913. The Great Depression in the US was accompanied by negative inflation. Source: Official Data
What is default?
Default is the inability of the state to meet its obligations. We saw a similar situation in 1998, when payments on government short-term bonds exceeded the capabilities of the Russian budget. As a result, the government refused to pay off its debts, and the country’s financial system was undermined.
In the event of a country’s bankruptcy, the following scenarios are possible:
the state needs to plug the liquidity gap that has arisen and pay off its obligations, so it seeks external loans from other states or from the IMF; the state freezes the population’s deposits and uses citizens’ personal funds to pay off debts; The central bank turns on the printing press and creates more money, which increases the money supply, leads to devaluation of the currency and can cause hyperinflation. In 2020, the global economy went through a recession, the main trigger of which was the pandemic. Accordingly, the demand for raw materials and their prices fell.
Since the Russian economy is oriented towards the export of raw materials, mainly hydrocarbons, the Russian budget naturally became less money. With the help of devaluation, the state compensated for budget losses and also supported exporters. At the same time, the depreciation of the ruble leads to an increase in the price of foreign goods and local products with an imported component, which negatively affects the well-being of citizens.
Is a weak ruble beneficial to Russia?
Despite the difficult situation in the world, the Russian economy turned out to be quite prepared for the crisis. The country’s gold and foreign exchange reserves in 2020-2021 were about $600 billion, and this amount exceeded the entire external debt of the Russian Federation by 25% . At the beginning of 2023, the country’s gold and foreign exchange reserves were estimated at $597.7 billion , and Russia is the fourth in the world in terms of accumulated reserves , but in 2022, about $300 billion fell under the freeze of Western countries. This complicated the country’s ability to service external obligations, and in March 2022, the question of technical default arose. The problem was not a lack of money, but the difficulty of settling in dollars.
Despite the fact that global rating agencies have lowered our country’s credit rating and it is under an unprecedented number of sanctions, Russia is solvent for its obligations and there is no talk of bankruptcy of the state. There are no prerequisites for this.
Growth of gold reserves of the Russian Federation in tons from 2000 to 2025. Source: Finsovetnik
How to protect capital
If we consider the situation hypothetically, then in case of default, bank deposits may indeed suffer. Then, it is probably safer to keep deposits in socially significant banks.
Let me also remind you that money in accounts up to 1.4 million rubles is insured by the Deposit Insurance Agency - DIA. This applies to accounts in any currency and in any banks that have received a license to operate in the territory of the Russian Federation. Not only savings are insured, but also interest. And compensation for foreign currency deposits, if anything, is paid in rubles at the Central Bank exchange rate on the date of the insured event.
Is it possible to get money back from a failed bank?
If your contribution is within the specified amount, this is an additional guarantee of its safety. But I repeat that in the event of a force majeure situation such as default, it is impossible to predict whether the DIA will be able to fulfill its obligations and how relevant this will be.
To further secure your capital, it makes sense to diversify it across three components: location, currency, and asset types. This is when the capital is represented by a deposit in several banks, a couple of hard currencies, such as the dollar and the Swiss franc, as well as gold and bonds, including those of foreign countries. This way, you maximally insure your money against the negative factors discussed above.