/ world today news/ The Russian financial authorities intend to impose restrictions on foreign companies leaving the country – the transactions they made when selling their assets had a negative impact on the ruble exchange rate. And if initially the authorities denied it, now they not only recognized this influence, but also took preventive measures. How will this help the ruble?
When the ruble began to weaken sharply in early April, experts pointed to the announcement of Novatek‘s purchase of Shell’s stake in the Sakhalin-2 project for almost 100 billion rubles as one of the reasons. And more than 2,000 companies are awaiting government approval to sell their stakes and assets. However, the Central Bank and the Ministry of Finance do not see this as having such a strong influence on the exchange rate.
Thus, the head of the Central Bank, Elvira Nabiulina, said that the main reasons for the weakening of the ruble are the drop in oil prices and exports. Deputy Minister of Finance Alexei Zabotkin also pointed to the decrease in export earnings and called the fact of the influence of transactions on the withdrawal of foreign companies from Russia exaggerated.
Deputy Finance Minister Alexey Moiseev expressed doubts about the logic that deals such as Shell’s exit from Russian assets lead to a jump in the exchange rate. Because the government commission places strict limits on the speed of acquisition of currency by companies.
But now the Central Bank and the Treasury have admitted that there is indeed an impact – and they intend to fix it. Now the authorities plan to impose a limit on the purchase of dollars and euros in the domestic market for large transactions, so that this does not lead to such a strong weakening of the ruble. The mechanism will be floating and will not be tied to a specific amount, Ivan Chebeskov, director of the Financial Policy Department of the Ministry of Finance, told Vedomosti. According to him, the Central Bank and the Ministry of Finance have also previously introduced conditions for the purchase of foreign currency as part of large deals that could rouse the market. And now his time has come again. This statement by the Ministry of Finance on Monday helped at least stop the fall of the ruble.
“Since the volume of trading on the Moscow Exchange in ruble is not very large, any large transaction to buy the currency can affect the exchange rate. This was evident in the way the very news that Shell had been given permission to pull out of projects in Russia affected the rate last week. The price of the transaction will be 1.2 billion dollars, which is a large amount for the foreign exchange market. That is why it became necessary to develop a special mechanism so that such sales of foreign business do not affect the currency rate,” says Fyodor Sidorov, a private investor, founder of the “School of Practical Investment”.
And the announced deal for the purchase of Shell’s assets by Novatek for 95 billion rubles is a very big deal. “Hypothetically, if the entire amount – the equivalent of 95 billion rubles in foreign currency – was acquired within a few days, one could see the exchange rate move by tens of percent, first in one direction and then in the opposite. This amount is comparable to the total average daily turnover in the dollar-ruble pair on the Moscow Stock Exchange. However, transactions on the stock exchange are impersonal, and it is possible to judge the “redemption” of dollars and euros only by the volatility of the exchange rate,” says Yevgeny Mironyuk, an expert on financial markets. However, according to him, such a factor as panic among retail buyers of foreign currency can easily cause both a sharp rise in the rate and an equally rapid reversal of quotations. The share of retail investors in trade has grown significantly: already four out of five investors on the Russian stock market are private, the expert adds.
What will the authorities come up with to exclude the influence on the ruble of foreign companies leaving Russia and taking the currency for their divested Russian assets?
“The details of the mechanism are not disclosed, but it is likely that they will place restrictions on the purchase of currency for such transactions. That is, the planned amount of currency will be purchased not once, but in parts over a certain period. That is why this initiative includes not only the Ministry of Finance, but also the Central Bank, which can control the activities of banks involved in the purchase of foreign currency,” says Vladimir Evstifeev, head of the analytical department of Bank “Zenith”.
That is, Shell or any other foreign company that is approved to sell Russian assets will be able to buy foreign currency and withdraw it from Russia gradually, as directed by the authorities.
This mechanism is designed to reduce the reaction to the ruble. “This should not affect the market nature of foreign exchange trading, but it will help smooth out fluctuations in exchange rates and prevent speculators from joining this process,” adds Evstifeev.
“The announcement of the currency restriction mechanism can be put on an equal footing with the verbal interventions of government officials aimed at stabilizing the exchange rate of the ruble. Presumably before, large purchases of foreign currency in the domestic market were coordinated by the corporations with the relevant ministries. This can be in the form of recommendations or by reference to regulations governing the negotiation of large industry-wide transactions in the market. But now this mechanism will be formalized,” explains Yevgeny Mironyuk. That is, now mass investors will not panic so much when it becomes known about another deal with a foreign company leaving Russia. Plus, the predictability of the exchange rate will increase, which is good for everyone – for ordinary citizens, for businesses, and for the government. Such a mechanism is certainly necessary, since the volatility of the ruble is a factor in the growth of inflation, the deterioration of the investment environment, consumer confidence and other indicators of the “health” of the economy, adds Mironyuk.
The ruble has already reacted to the statements of the Ministry of Finance about the preparation of a new instrument to support the exchange rate. And that should really support the Russian currency. That is why experts are waiting for a smooth strengthening. In addition, the tax period begins at the end of this week: the ruble will receive support from exporters. Expectations of rising oil prices are a long-term factor in strengthening the Russian currency. However, no one expects a strong strengthening. Experts believe that the ruble will be able to strengthen to 78-80 rubles per dollar by the end of the third quarter and to 75-78 rubles by the end of the fourth quarter.
The Ministry of Economic Development has updated its forecast – and now they expect that the dollar will be worth 76.5 rubles in 2023 (this is the average annual exchange rate of the pair). However, the analysts of “Promsvyazbank” consider this forecast to be too optimistic. They do not exclude a corrective strengthening of the ruble in the coming months, but do not believe in the sustainability of this trend. Therefore, they are waiting this year for 81.7 rubles per dollar – as an average annual rate.
“However, we should expect that the dollar will gradually grow and the ruble will weaken. How controlled and smooth depends on the actions of the regulator and the government. In any case, this year we will not return to the dollar value of 60 rubles,” Sidorov declared.
Translation: V. Sergeev
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