Russia may return the mandatory sale of foreign currency proceeds

The Russian authorities are discussing the return of mandatory sales by exporters of foreign exchange earnings. This was reported by Reuters with reference to five unnamed sources.

The authorities are trying to stop the fall of the ruble, which has reached the mark of 100 rubles per dollar against the background of the ongoing war with Ukraine for a year and a half. The efforts of the Central Bank, which immediately raised the interest rate from 8.5% to 12%, had only a short-term effect on the dynamics of the exchange rate, say agency interlocutors.

Mandatory sale of currency revenue was introduced shortly after Russia’s attack on Ukraine in order to stabilize the financial situation when large-scale Western sanctions were imposed against Russia. Later it was canceled.

The sources of the Financial Times state that the power circles are discussing a proposal to oblige Russian exporters to sell up to 80% of their revenue in foreign currency within 90 days after delivery. Companies that ignore this requirement will be left with state subsidies.

Other measures, among others, include a ban on paying dividends and issuing loans abroad.

The agency quotes one of the sources as saying that business will be forced to pay for the government’s mistakes: “You can milk a cow to death, but when the cow is dead, who will you milk? The population?”

The increase of the key rate to 12% on August 15 took place against the background of the collapse of the ruble exchange rate. On August 14, at the Moscow Stock Exchange, the dollar and euro renewed their highs since March 2022. The dollar exceeded 101 rubles, and the euro exceeded 110 rubles. Thus, since the beginning of the year, the ruble has fallen against the dollar by more than 40%.

Experts believe that the ruble is weakening due to the fact that there is not enough currency on the domestic market due to reduced export revenue. At the same time, there is demand for currency from importers and large businesses.