Russia plans to loosen wartime capital controls

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It was stated that Russia is considering gradually reducing the capital control it has implemented in order to stabilize the markets after the invasion of Ukraine.

According to Bloomberg sources, the focus of discussion this week was extending the deadline for exporters to have their earnings converted to rubles and options to reduce the share of foreign revenue that companies have to sell in the market to less than 80 percent.

Sources noted that closed negotiations were held with the participation of the Central Bank of Russia, but no final decision was made.

The Central Bank of Russia reported that it has confirmed that it is considering extending the three business days required for exporters to convert their Foreign Currency capital.

The rules, which have been in place for more than a month, included a series of emergency measures in response to the sanctions that came into effect after Russia’s invasion of Ukraine.

Faced with the wave of sales in Russian assets and the largest depreciation of the ruble since 1998, monetary policy makers took a series of steps, including a ban on the sale of securities held by foreigners, as well as decisions mandating the sale of reserve currencies. had received.

The responsibility of the ruble has long been in export companies

The central bank, unable to intervene in the market due to the confiscation of about half of Russia’s international reserves, and energy producers such as Rosneft and Gazprom mainly to exporting companies.

However, tight controls created a mismatch between foreign exchange supply and demand, which helped fuel the ruble’s rise and regain all the ground it had lost after the war began.

With commodity prices rising, some Russian metals and mining companies are now struggling to sell dollars in such large volumes, according to sources familiar with the matter.

Russia, which has benefited greatly from record-breaking commodity prices, including gas, metals and grain, generates billions of dollars a month from the exports of these products.

Russia’s 2022 energy export revenue will reach $321 billion

Bloomberg Economics, Russia’s revenue from energy exports will increase by more than one third compared to 2021 321 He expects it to reach billions of dollars.

According to data from ITI Capital, exporters sell 1.4 billion dollars daily. At the beginning of the war, the Central Bank of Russia was putting $1 billion a day into the market to support the ruble.

“There is a huge foreign exchange inflow to Russia, but the market has a hard time digesting such a large amount,” said ITI Capital Analyst Iskander Lutsko. There are no players, not even local ones.”

Lutsko added that he predicts exporters will be able to sell at most 40 percent of their income. Before the war, Russia aimed to reduce the ruble’s dependence on oil prices by buying foreign currency when crude oil rose above a certain level and selling when it fell.

Signals of relaxation in capital control from the central bank

The central bank has already removed some capital control practices. The bank, which first eased the restrictions on money transfer abroad, announced last week that it would abolish the commission applied to those who buy foreign currency through brokers. The bank also announced that it has removed the application that prohibits the sale of foreign currency to individuals.

Decisions caused the ruble to weaken sharply this week, while the collapse of imports paved the way for new measures and caused Russia’s current foreign trade surplus to reach a record level.

Oxford Economics Chief Economist Tatiana Orlova said, “For example, increasing this figure to 50 percent will give the right message”, said: made its assessment.

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