Economist Belyaev criticized the idea of ​​mandatory repatriation of foreign currency earnings of exporters

“Business needs to have dollars and euros abroad on a permanent basis”

The urgent task of saturating the Russian economy with foreign currency is acquiring more and more potential scenarios. Moreover, we are talking about dollars and euros rather than “friendly” but low-liquid Indian rupees or UAE dirhams. The Ministry of Finance proposes to introduce repatriation (mandatory return to the Russian Federation) of foreign exchange earnings of exporters, said Ivan Chebeskov, director of the department of financial policy of the department.

According to the official, different options, “interest rates” and monetary units in which such a mechanism should be established, can be discussed. Thus, the project is still in its infancy, and it is unknown whether it will ultimately be translated into something concrete and working. There is a high probability that the matter will not move beyond words. Let us remind you that the authorities returned to discussing currency regulation measures a month ago, when the dollar exchange rate immediately exceeded 100 rubles, and the Central Bank unscheduled raised the key rate immediately to 12%. Among the possible options for stabilizing the situation in the foreign exchange market, the mandatory sale of foreign currency earnings of exporters within the Russian Federation and a ban on the payment of dividends abroad were mentioned. A new proposal has now been announced.

The facts outlined by Bloomberg partly overlap with the initiative of the Ministry of Finance. According to him, Russian billionaires have recently stepped up the repatriation of their capital from Europe to Russia and “friendly” countries. In particular, we are talking about the recent move to the Russian Federation from Cyprus of the companies United Medical Group CY Plc and MD Medical Group Investments Plc, which are controlled by businessmen Igor Shilov and Mark Kurtser. This increased the total value of assets returned to the country after February 2022 to at least $50 billion, Bloomberg calculated. The trend contradicts the long-established practice of domestic oligarchs to keep their funds in Europe, where previously it was possible to receive dividends in hard currency and pay low taxes. Now, for the richest people in Russia, these benefits have been reduced, essentially, to zero due to strict sanctions restrictions from the US, UK and EU. For example, the suspension of a double tax treaty makes it impractical to maintain business in Europe.

“But the main reason is not this, but the threat of freezing foreign assets,” notes financial analyst, candidate of economic sciences Mikhail Belyaev. – The West is not able to deprive our businessmen of their property rights, but it is quite capable of blocking their funds. This means that this money must somehow be rescued from an unfavorable environment. As for the initiative of the Ministry of Finance, the goal is obvious – to attract foreign currency to Russia, increase demand for the ruble and thereby remove the current market pressure from it. The effect in this case can only be short-term: this will not correct the exchange rate dynamics, since it is determined by fundamental factors hidden in the depths of the economy. Such, for example, as the obvious tilt in foreign trade towards imports.”

At the same time, Belyaev argues, the idea of ​​a financial department comes into a certain contradiction with the interests and needs of exporters. The latter, in order to conduct business abroad, carry out trade operations, buy and sell goods, must have funds denominated in foreign currency there on an ongoing basis. Mandatory repatriation of foreign currency earnings will result in a serious headache for exporters: they will need to transfer this money into rubles (which are constantly depreciating), and then think about how to buy something with rubles from foreign partners. Any conversion entails currency risks and costs. India and China need dollars and euros first of all.”

“Of course, this has some things in common with the trend that Bloomberg writes about,” Belyaev notes. – But if the Ministry of Finance intends to directly influence the ruble exchange rate, then in the case of the repatriation of capital from Europe we can only talk about an indirect, side and delayed effect. By the way, very positive. Returning to the country, this money ends up in accounts in certain banks. And they, in turn, strengthen their resource base and the financial sector as a whole, subsequently gaining the opportunity to more actively lend to industry.”