Russia may partially restore capital controls to halt the depreciation of the ruble. Bloomberg reports, citing four sources.
Sources say that on the eve of August 14, the government, in a meeting with major exporters of Russian goods, explored the option of reinstating the mandatory sale of export proceeds. Not everyone agreed with the proposal. Another meeting is planned for the weekend to discuss this option further.
On August 15, the Central Bank decided to raise the key rate from 8.5% to 12% immediately, citing the need to limit risks to price stability.
Following the move, the ruble initially strengthened but then weakened again to around 99 rubles per US dollar and about 103 rubles per euro. In the wake of Bloomberg’s material, the ruble traded on the Moscow Exchange at 97.09 per dollar and 106.01 per euro by 22:00 Moscow time.
how was 2022
Last year, exporters were required to sell their foreign currency earnings by February 28, 2022, shortly after Russia began what it described as a special military operation in Ukraine, with the ruble weakening under Western sanctions. President Vladimir Putin issued a decree mandating that exporters sell 80 percent of their foreign exchange earnings.
The rate obligation was reduced to 50 percent in May as the ruble displayed stability. In June, the mandatory requirement was removed, and the government commission was tasked with monitoring foreign investment to determine market shares. In February 2023, Putin canceled the regulation that required the sale of export proceeds.
Peaks not reached
Bloomberg notes that the current situation limits the ability of Russian economic authorities to intervene in the foreign exchange market, given that a sizable portion of the central bank’s reserves remains frozen due to sanctions.
On August 14, the exchange rate showed the dollar at 101 rubles and the euro at 111 rubles on the Moscow Stock Exchange. Those levels represent the ruble’s weakest points since March 2022, though they do not reach the highs seen in March 2022 when the euro traded at 127 rubles and the dollar at 120 rubles. The Central Bank attributed the ruble’s weakness to a drop in exports and higher lending costs for households.
Russian Vice President Maxim Oreshkin attributed the ruble’s weakness to the regulator’s relatively soft policy but assured that the Bank of Russia has tools to restore balance. Finance Minister Anton Siluanov explained the trend as a result of trade inflows and outflows, noting that the impact of the sale of foreign enterprises remains unlikely given a monthly ceiling of roughly one billion dollars for withdrawals.