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>>colone+(OP)
When a currency is devaluating but interest rates are low, the banks can borrow at low rate, sell rubles for dollars into sliding market, wait for ruble to slide more, then repay the loan with cheaper rubles and make a big profit. The trouble is they also accelerate the slide, courtesy of the low rates. The central bank rate increase was likely done to head off that particular danger. Of course there are many other factors pressing the ruble down as well, which central bank can't control, but at least they are trying to prevent worseing the situation with their own hands.

Long term high interest rates plus high cost of import supplies will likely strangle the economy though. Increased demand for domestic goods due to higher import prices is a good thing, but one needs capital to operate most businesses. When interest rates are high you can't borrow, and when political situation is flaky fewer people will want to buy equity.

>>DenisM+ab
>the banks can borrow at low rate, sell rubles for dollars into sliding market, wait for ruble to slide more, then repay the loan with cheaper rubles and make a big profit.

don't forget that even according to Russian government 60% of currency trading is insider based, ie. those banks and big traders are tipped (it is Russia after all - 137th place out of 170 rated in world corruption index) when for example Central Bank is to perform a ruble supporting "intervention". SEC and Fed cozying up to Wall St have nothing on how things are done in Moscow :)

>Increased demand for domestic goods due to higher import prices is a good thing

That would probably be the case for any normal country, yet not for Russia. Due to food import sanctions self-imposed by Russia, the price of foreign foods has increased, and the domestic foods prices immediately followed it as a result thus directly increasing consumer felt inflation. And there is no way Russia can noticeably increase food production, at practically any food prices. Instead the only option is to buy in other countries like Brazil, which means paying dollars which would mean even higher ruble prices for these foods on Russian market.

Like during 199x years, for the next several years Russians will be back to dollars (and "black" accounting/contracts/salaries/offshoring) while government would implement significant obstacles to such "dollarisation" of the economy. Which means an immense business opportunities for BTC and other forms of money infrastructure allowing to perform "point A" - rubles in Russia - to "point B" - dollars in a Western country - and which are less subject to the [Russian] government control.

It is kind of surreal - i was inside USSR when it collapsed due to the low oil prices of 198x. I didn't understand it back then. Now i watch this, similar, collapse of smaller, Putin's, version of USSR from comfortable "orchestra" seats (Silicon Valley) and can't stop wondering how things haven't changed a bit.

Edit: to the "twelve40" below - i lived in the USSR/Russia the first 28 years of my life. One can write a huge number of PhD dissertations on the problems of Russian agriculture - legal, social, historical, economical, climate-related, psychological, etc... About the same question is why Russia can't produce a good car, at any prices :)