Ruble plummets as banks around the world, including in Canada, freeze Russia out

The Russian ruble plunged to its lowest level on record on Monday after Western nations moved in unison to try to freeze the country out of the global financial system and sell off Russian investments in condemnation of Putin's decision to invade Ukraine.

The invasion has caused volatility in the global economy, especially the energy sector, but developments on Monday by financial powers around the world are an attempt to direct that uncertainty squarely on the Russian economy itself.

The ruble had plunged more than 30 per cent after the move to block Russian banks from the SWIFT global payment system, which provides a secure messaging system to facilitate cross-border money transfers.

Among other things, the sanctions by Western nations are meant to crimp the Russian central bank's access to over $600 billion US in reserves and hinder its ability to support the ruble.

Central banks around the world are effectively cutting Russia off from its coffers outside the country, and retail banks in North America and Europe are following suit by halting business with them.

The Canadian government announced on Monday that Canadian financial institutions are now "prohibited from engaging in any transaction with the Russian central bank." 

If the Russian central bank's assets are frozen and banks refuse to make deals with them, the central bank's ability to prop up the value of the ruble by buying it up is significantly limited.

The Russian central bank raised its key rate to 20 per cent from 9.5 per cent in a desperate attempt to shore up the plummeting ruble and prevent a run on banks. But the move didn't work, as the ruble fell as low as 119 to the U.S. dollar at one point on Monday morning.

That's down by about a third from where it was a week ago, and more than three times lower than what it was worth in 2014, before Russia's incursion into Crimea.

Sovereign wealth funds, including those of Norway and Australia, have announced plans to sell their Russian investments. The Canada Pension Plan has not had any direct investment in Russia since 2014, a spokesperson told CBC News.

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British oil giant BP announced over the weekend that it would sell its 19 per cent stake in Russian state-owned oil company Rosneft. The move is expected to cost the British oil giant as much as $25 billion, but CEO Bernard Looney said the shocking invasion "has caused us to fundamentally rethink BP's position with Rosneft. I am convinced that the decisions we have taken as a board are not only the right thing to do, but are also in the long-term interests of BP."

Later in the day, oil giant Shell announced plans to do the same, selling off interests in LNG facilities and extricating itself from any involvement in the proposed Nord Stream 2 pipeline to bring Russian gas to Germany.

Even Switzerland, famous for its neutrality and banking secrecy laws, is participating in freezing Russia out of the global banking system.