The presidential decree on the mandatory sale of foreign currency earnings will not be published

The restriction on cross-border transactions of large Russian exporters was introduced de facto behind the scenes: the presidential decree defining the procedure for selective foreign exchange control, introduced by a government decree that is not yet ready, will not be published, nor will the list of 43 groups of companies that are subject to it. In the list, according to Kommersant, the groups with an export share of revenue of more than 60% are a small number of large commodity exporters. The main thing in the new order is strengthening control over not only sales, but also purchases of currency on the Russian market; it precedes the creation by Rosfinmonitoring of a full-fledged system for monitoring foreign exchange transactions – now, as it turns out, there is none. However, the chances that the new order will remain temporary are high: regardless of whether these measures will work, other things being equal, the ruble should have strengthened in the next six months or at least months even without their introduction.

On the evening of October 11, a message appeared on the government website about the signing of a presidential decree on the mandatory sale of foreign currency earnings by individual large exporters. The government, as reported, was instructed to adopt a resolution within 24 hours on the volumes and timing of the sale of proceeds (at the time the issue was submitted it had not been published). The text of the decree also did not appear yesterday – both the document itself and the list of companies it concerns will remain closed, said presidential press secretary Dmitry Peskov. According to a federal official familiar with the discussion of the document, the White House decree will be published on Friday night or Friday morning and will come into force in the coming days, when Rosfinmonitoring’s yet unapproved instructions on the further course of action will also be ready. The decision is temporary, notes Kommersant’s interlocutor, until “Rosfinmonitoring, through access to data from groups of companies, will monitor their operations to make sure that they show everything honestly.” The list of exporters who will work in the new regime is closed: Kommersant only knows that it includes companies whose share of exports in revenue exceeds 60%. There were other criteria, already qualitative: we are talking about a decrease in trust in specific groups that are suspected of not returning revenue to increase the profitability of the holding as a whole. “They were given several months to behave openly. They warned us what the next step would be,” notes a participant in discussions with the largest exporters.

Selective control over foreign exchange earnings is a temporary and tactical measure, Kommersant’s interlocutors in the ministries insist. According to a high-ranking official, constant monitoring of the withdrawal of currency from the country could be a strategic measure to control the ruble exchange rate; work on creating a system for tracking the routes of capital outflow from the country is “underway.” From these circumstances it follows that Rosfinmonitoring currently does not have such a system, nor, apparently, does it have sufficient powers for a detailed study of the cross-border operations of large companies. Despite the exotic format of the restrictions, agreements within the extended government on the inadmissibility of criticism of such a decision are obviously part of an operation to stabilize the exchange rate of the ruble, which, even based on assumptions about what might be written in the decree, has risen in price against the dollar by more than 3%.

The return of the mandatory sale will not affect companies with a small share of foreign exchange earnings, and they will be able to maintain current foreign trade settlements, Central Bank Governor Elvira Nabiullina said yesterday during a speech in the State Duma, commenting on the innovations. According to her, the measure will increase the efficiency of currency sales and liquidity in the foreign exchange market and smooth out short-term exchange rate fluctuations. “There are no contradictions between my position and the position of the president on this issue,” added Ms. Nabiullina. The head of the regulator also explained her previously critical position regarding such measures: “I can repeat these doubts. Including the mandatory sale of foreign currency earnings, companies have the opportunity to buy back (currency) immediately, and this will increase the turnover at the auction, but still, the exchange rate will be determined by fundamental factors.”

The most interesting thing about the scheme, which is still closed (therefore its effectiveness cannot be assessed even roughly), is that the Central Bank and Rosfinmonitoring will monitor not only how exporters sell currency, but also how they buy it, since companies will be required to provide indicative plans. schedules of such transactions. A return to the mandatory sale of currency, however, may de facto become a measure to reduce the withdrawal of capital through non-return of proceeds, notes Kommersant’s interlocutor familiar with the discussion. Rubles are already returning to the Russian market through other transactions – their use on international markets is complicated. Operations for the repurchase of currency are associated with transaction costs, but for large companies and banks serving groups, they may be insignificant, and the potential benefit from such transactions in the context of a falling ruble is sufficient. Let us note that, in general, the “avoidance of return of proceeds” may not be due to any decision of the owners or management of the “suspected” groups – this may be the result of the effective work of corporate and bank treasuries, maximizing the profit of the holding.

According to Elvira Nabiullina, the largest exporters sold about 87% of foreign currency earnings in January-August, but a significant part of the contracts is already being converted into rubles – about 40%. The head of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, who said that “the measure did not come as a surprise to business,” linked the delays in the return of revenue “to the advance of imports or the uncertainty of the exchange rate.”

President and Chairman of the Board of Sberbank German Gref noted the strengthening of the exchange rate during the day, but added that “fundamentally, of course, market exchange rate policy is determined by factors of supply and demand.”

In general, there appears to be no officially accepted and comprehensive hypothesis about what exactly causes the weakening of the exchange rate, while there is a domestically motivated demand to prevent further devaluation.

So far, the share of the ruble in payments for exports remains relatively stable: in August it amounted to 38.2%, on average for January-August – 39.4%, the share of the yuan is growing, the shares of the US dollar and euro are decreasing. The yuan is also growing in imports, the share of the ruble is about 30%. In terms of the difference in revenues for imports and exports, the largest influx in June-August came from the ruble (plus $18.8 billion in the total for June-August), followed by the US dollar (plus $9.1 billion) and other currencies (plus $1.5 billion), considered the authors of the telegram channel “Hard Figures”. At the same time, the trade surplus continues to increase: in September, the current account surplus increased to $9.6 billion compared to $5.7 billion in August; in July, the account balance was $1.3 billion.

The increase in export revenues, at least in the oil market, is confirmed by data from the International Energy Agency: total revenue from the sale of oil and petroleum products in September increased to the maximum since July last year and amounted to $18.8 billion (plus $1.8 billion by August, while from January to June monthly export revenues, according to the agency, decreased from $15 billion to $12.9 billion). Not only prices grew, but also supply volumes: exports of oil and petroleum products increased approximately equally, by a total of 460 thousand bpd. At the same time, all types of Russian oil were trading at prices above $80 per barrel. All this speaks in favor of the fact that, without additional reasons, the ruble will be stable or strengthened in the coming months, regardless of whether the secret selective currency controls turn out to be effective.

Tatiana Edovina, Dmitry Butrin