Column by Tatyana Edovina about the controversy surrounding foreign exchange earnings

Last week, business turned to First Deputy Prime Minister Andrei Belousov with a request to solve the problems of enforcement of the decree on the mandatory sale of foreign currency earnings by some exporters dated October 11 (in particular, the “opacity” of its approval with the interested departments – clarifications from the Ministry of Finance do not allow all questions to be resolved). The letter from the head of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin (available to Kommersant), also indicated that companies are “extremely concerned” about the risks of introducing additional fines for failure to comply with requirements. Businesses are not satisfied with the need to buy foreign currency when receiving export earnings in rubles to return to the Russian Federation, nor with the lack of a regulatory framework for “exceptions” from the decree by decision of the government commission on foreign investments.

The dispute over the effectiveness of the measure, however, concerns not only fines – it is primarily about assessing its impact on the ruble exchange rate. The main argument of supporters of maintaining control is the strengthening of the national currency. However, the Central Bank associated this process with the tightening of its own policy (the rate has been consistently increased since July – this increases the attractiveness of instruments in rubles and restrains imports through cooling lending), as well as with an increase in the value of exports in the autumn months – in August-September there was an increase in prices for export goods, taking into account lags, this revenue entered the market in the second half of autumn, Elvira Nabiullina spoke at the last meeting of the Bank of Russia.

Judging by the regulator’s data, a “subsidence” in the share of net sales of foreign currency to foreign exchange earnings was noted in July-August; already in September this figure increased for the 29 largest exporters to 71% (for companies covered by the decree, it was 73%, data for August no), in October the shares increased to 77% and 86%, respectively, in November – to 87% and 92%. The decree stipulates that companies must credit accounts in Russian banks with at least 80% of the currency from export contracts and sell at least 90% of these amounts. Data for January recorded a decrease in both the foreign exchange earnings of exporters and the demand for foreign currency from the population (the ruble exchange rate strengthened by 0.4% over the month).

In the context of tightening control over compliance with sanctions and complications in settlements (the European Union countries have already published the 13th package of sanctions, including companies from China, Kazakhstan, India, Serbia, Thailand, Sri Lanka and Turkey; the United States also approved new sanctions for supporting the Russian military-industrial complex, which expands the possibility of applying secondary sanctions to foreign banks), businesses have another argument in favor of weakening control – the complication of cross-border transactions. More important, however, will still be the impact on the trade balance of the Russian Federation – in January it changed slightly compared to December, the statistics of subsequent months will be more demonstrative.