Even though Russia has a lot of foreign currencies at the moment, the authorities are carrying out checks on it in case things get worse. Ordinary citizens can no longer take euros and dollars out of the country in large quantities. The central bank requires that 80 percent of euros, dollars and other hard currencies entering Russia be converted into rubles, either on a Moscow exchange or through a licensed bank. The central bank then routes those hard currencies to the Ministry of Finance and private banks, which use them to pay off foreign debt, and companies the bank decides should be allowed to import products.
The Kremlin also requires hostile nations to settle their purchases of natural gas (not oil so far) in rubles. They can pay in euros, dollars or any other currency specified in the contracts, but 100 percent of these currencies will be converted into rubles by Gazprombank (the bank serving Gazprom, one of the world’s largest gas producers) at the official exchange rate to complete the transaction. “The advance of this policy has changed many traders’ outlook on the ruble,” Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center, told me.
Germany and Italy, the nations most affected by this requirement, have rejected the Russian application, claiming that it violates their contracts. “Right now there is a real game of chicken,” said Jane Foley, a currency strategist in London for Rabobank of the Netherlands.
Supporting the ruble and proving that Biden’s observation of the rubble was wrong “is a very important propaganda signal,” Sergei Guriev, a professor of economics at Sciences Po in Paris who has directed the New Economic School in Moscow since 2004, told me. to 2013.
Also politically valuable to Putin is Russia’s insistence on settling oil and gas transactions in rubles rather than dollars. “Putin is saying, ‘I want to impose my own rules. I will not be a lover of the rules. I’ll be a rule maker. I want you to settle in rubles, “said Aleksashenko.
However, closing the ruble’s convertibility cannot isolate Russia from market forces forever. The sanctions are already pushing the inflation rate up and will cause more and more shortages of key components for manufacturers, Aleksashenko said. The currency will come under renewed pressure as Russia faces large debt payments denominated in foreign currencies, Foley said. The ruble will also face downward pressure if Russia allows foreign companies that are pulling out of the country to sell assets and cash out, he said.
Then there is the brain drain. “Everyone I know is trying to escape” from Russia, Guriev said in March in a video seminar in Princeton. Lichfield told me: “The economic outlook for Russia is still very bleak. The fact that capital controls have been reintroduced has negative implications for Russia’s future. “