Russia Turns Screws on Exporters After Debating Capital Controls

The ruble has recovered after Russia turned the screws on exporters
The ruble seems to like it and strengthened a little, to 93.8 per dollar.

Here’s more from Bloomberg:

The Russian government will end strict restrictions on the movement of capital and prepare proposals for exporters to allow them to transfer their income abroad to help develop the economy.

After the meeting on Wednesday between President Vladimir Putin and the leaders, the authorities are improving the control of the capital, according to three people familiar with the conversation.

The guidelines are intended for large exporters and all companies and will go beyond the recognition that foreign sales include cash transfers such as dividends and loans, people said, who asked not to be named to discuss further discussions. public.

Putin was briefed on the plan, and the meeting included local governor Elvira Nabiullina and Finance Minister Anton Siluanov, according to Russian business daily Vedomosti. Despite the price of the ruble this week, it is still one of the three worst performers in emerging markets, having fallen by 22% since the beginning of the year.

The Bank of Russia 350-comparison seemed to have limited gains on Tuesday, as much as 12%, in the emergency meeting. In the past few days, the ruble has expanded from the beginning of 100, that is, to nearly 102 per dollar.

Russia Turns Screws on Exporters

Analysts say further measures are needed to return the ruble to the 80–90 leaders of the region who think they have received it. Today, it trades at 93.6 per dollar, up 1% on the day.

Russian business daily Vedomosti and Bloomberg News reported that Moscow is not introducing capital controls at the moment, limiting the movement of capital, but is preparing proposals for exporters to send their foreign earnings to help fix the ruble.

Following yesterday’s meeting between President Vladimir Putin and senior officials, authorities are currently adjusting the city’s administrative procedures, the newspaper said.

The stock market was in the red, with BAE Systems being one of the biggest losers on the FTSE 100 index in London, down 4%.

Prices tumbled after BAE, Britain’s biggest arms company, said it had agreed to buy the U.S. technology company. Space Ball Aerospace, for $5.6 billion (£4.4 billion), was the biggest company in England retained this year.

The FTSE 100 defense company said the purchase of the Colorado business would help its expansion into the US defense technology sector.

The agreement comes at a time of increased spending on global warfare and espionage technology, spurred by Russia’s invasion of Ukraine. It will also join the US in establishing a military arm, the Spokesperson’s Office, to try to keep pace with China.

Russia Turns Screws on Exporters

The future of Wilko’s 12,500 employees hung in the balance on Thursday as they waited to hear if a major competitor had emerged for its financial products.

The interested parties of the home store, which has 400 stores, have until Wednesday night to give their best advertising to the company that called the managers in the last week because he met the cash.

It is expected that dozens, if not hundreds, of Wilko stores will have to close because the bid for the entire group goes badly, said insiders.

However, the entire chain should continue to trade next week when talks about the delivery of the group’s assets continue. Bosses are in talks with potential buyers, including Poundland, B&M, Primark, and Home Bargains, for the group of up to 50 stores each.

Russia currency

August 16 (Reuters) – Russia’s damaged ruble offered a solution with an emergency 350-point rate hike this week to 12%, but action is needed plus longer lasting effects.

The Russian currency has lost more than a fifth of its value since Russia attacked Ukraine in February 2022 and fell past the initial mark of 100 per dollar on Monday.

The impact of the sanctions on lower incomes and higher import prices has weakened the ruble, as has Moscow’s increased military use to prosecute its war in Ukraine.

With rising inflation pushing up commodity prices. And with a presidential election approaching in March 2024, the fate of the ruble is a priority for Russian officials.

One way to stabilize the ruble is for Russia to withdraw its troops from Ukraine. And cut back on military spending. But assuming Moscow does not take these steps, there are many things that could happen. Try Russia:

Russia Turns Screws on Exporters

But higher borrowing costs are squeezing economic growth prospects. And making life difficult for companies and, especially, the government as it finances military operations in Ukraine.

The Ministry of Finance said that the lower rate will reduce the pressure on the budget. Deficit and its financing needs.

Moreover, future increases are not likely to prevent continued funding, UBP said in the letter.

“Higher interest rates will slow down the ruble’s depreciation.”

CAPITAL CONTROL

Russian officials are discussing the reversal of the need to sell foreign currency to investors. Five sources familiar with the matter told Reuters on Wednesday. Among other administrations. capital that should return the ruble.

A source said four measures were being considered:

• Exporters send back up to 90% of their export earnings to Russia.
• Exporters who do not comply lose access to government support.
• Restrictions on dividends and loans paid to foreign countries, including in decisions considered “friendly” by Russia.
• Prohibition of import subsidies.

Russia ordered exporters to transfer 80% of their FX income last year to boost financial stability. Ultimately pushing the ruble to a more than seven-year high by June 2022.

Sources said that if the ruble does not show signs of improvement on Friday, capital controls may resume.

Reduce LIQUIDITY SURPLUS

The scope of the remaining options may be too limited to make a difference. But the central bank has other tools at its disposal.

It can try to reduce the ruble’s income by increasing the banks’ reserve requirements, thereby reducing the foreign-exchangeable currency.

The Bank of Russia has indicated that it is not unreasonable for the ruble to change and that the expectation of new measures to prevent the decline will at least temporarily weaken the demand for the currency abroad, Promsvyazbank analysts said.

The central bank has been told not to hold a one-year repo. Repurchase agreement, or auction that helps banks manage their liquidity. The banks now owe the central bank 1.28 trillion rubles ($13.46 billion) because of this challenge.

Deputy Prime Minister Alexei Zabotkin said that the decision to end. The repo competition was not connected to the weakness of the ruble and was a coincidence.

FX impact

One way to protect the ruble is for Russia to sell foreign currency through its National Monetary Fund (NWF). After a month-long hiatus, Russia resumed FX intervention in January, selling off the Chinese yuan.

Russia tried to resume FX purchases in August, but it quickly withdrew, effectively a

Russia’s inflation and devaluation have highlighted the growing disagreement between the Kremlin and the country’s central bank.

The Central Bank of Russia (CBR) raised this in an emergency meeting on Tuesday. The interest rate by 350 basis points to 12% in a bid to reduce the depreciation of the currency. against the ruble, which fell to a 17-month low of nearly 102 to the dollar on Monday.

The sudden move came after President Vladimir Putin’s economic adviser, Maxim Oreshkin. Wrote a statement arguing the recent increase in inflation. And currency bankruptcy is the result of the “law of money”.And that the central bank “has all the necessary tools to normalize the situation.”