You can’t hide a dollar in your pocket

The system of partial currency control will be supplemented with new elements. The government and the Central Bank are preparing unannounced “systemic decisions” on foreign trade settlements; 43 groups under currency control will be allowed to repay external debt within the limit; also, according to Kommersant, the Ministry of Finance is preparing a document that will oblige a number of companies to report on their foreign currency assets and liabilities for abroad.

The government, together with the Bank of Russia, is preparing “system solutions” that will increase the availability of settlements with foreign counterparties, Prime Minister Mikhail Mishustin said, speaking at the international export forum “Made in Russia-2023”. However, companies are still “finding opportunities to settle accounts with counterparties despite all restrictions,” he added, noting the need to create “their own or a foreign trade infrastructure created with partners.” There are no details of these decisions yet, the White House press service told Kommersant. The latest measure to facilitate settlements was the government order published at the end of September, which approves the list of countries whose banks and brokers will be allowed to trade on the Russian foreign exchange market.

The Prime Minister’s mention of “systemic solutions” suggests that de facto changes in the capital control system, provoked by exchange rate movements in August-September, will not be limited only to new bans, administration and strengthening of reporting – this is only an intermediate option, the final version of the regulatory model There will eventually be more financial markets. Yesterday the first and still insufficient information appeared about other components of this model. According to Kommersant, among them is tightening control over the foreign exchange flows of companies on a permanent basis, and not in an experimental mode for six months, as the decree envisaged.

Let us recall that against the background of the weakening of the ruble, business concerns were caused by measures to strengthen control over foreign exchange flows. We are talking about export duties on a wide list of goods tied to the ruble exchange rate (they begin to take effect when the dollar exchange rate is above 80 rubles and amount to 4–7% depending on the exchange rate), and about the presidential decree on the mandatory sale of foreign currency earnings by individual large exporters ( see “Kommersant” dated October 13). From October 16, exporters from the closed list are required to credit their accounts in Russian banks with at least 80% of the currency received under export contracts, in order to then sell at least 90% of these amounts on the domestic market.

As follows from the government decree published yesterday, exporters from the list specified in the decree (a total of 43 groups of companies) will have to ensure that their subsidiaries, including those abroad, comply with the requirement for foreign exchange earnings. At the same time, by decision of the government commission, exceptions to the decree may be accepted – companies on the list will be able not to sell foreign currency in an amount corresponding to the volume of their repayment of external debt. This was probably also assumed by the text of the decree itself, which will remain closed, as will the list of 43 groups to which it applies.

In addition, according to Kommersant, the Ministry of Finance has prepared a draft document obliging companies to declare foreign assets and liabilities from January 1. The list of companies will include subsidiaries and foreign subsidiaries; the Central Bank is preparing it. The Ministry of Finance yesterday refused to comment on the project. Let us recall that it was previously assumed that only currency flows, but not assets and liabilities, would be controlled (by Rosfinmonitoring).

Note that duties on exports from the Russian Federation, depending on the exchange rate (which has not yet strengthened enough to consider the White House measures to have worked), remain a more influential tool at the macro level than selective foreign exchange controls. First Deputy Prime Minister Andrei Belousov said yesterday that export duties, which for a number of sectors are considered sensitive and limit exports (and are therefore capable of weakening the balance of payments in the future through a reduction in overall exports, and this potentially devalues ​​the ruble), make it possible to withdraw from exporters 30% to 40% additional income from the weak ruble exchange rate. The new requirements turned out to be most sensitive for exporters with low margins operating in competitive markets – the introduction of duties forces them to increase prices for products, which carries the risk of losing competitiveness compared to suppliers from China, Turkey or local manufacturers, says Kommersant’s interlocutor in the market . “It’s not a general story, but for many the impact on margins will be significant,” he admits. “Business is more comfortable with more predictable regulation that takes into account the situation of companies at different stages of investment cycles – this is much better than a sudden change in the rules.”

Last year, almost half of the exporters surveyed by Yakov and Partners (220 companies) noted a drop in export revenue – this trend did not affect only the chemical industry, metallurgy and agro-industrial complex; in other sectors the decline exceeded 15%. Total non-resource non-energy exports decreased at the end of the year by 1% – to $189 billion ($191 billion a year earlier), the share of the upper and middle limits in it decreased, and the lower one increased from 36% to 44%. As a result, a little more than half of the companies reoriented themselves to the markets of “friendly” countries, the rest to the domestic market. In the next three years, however, 70% of respondents expect export revenues to grow by 10–30%. Two-thirds are confident that they can compete on both price and quality.

The refusal of foreign companies (in particular, traders) to work with Russian ones has led to the “straightening” of supply chains, but companies note that “it is extremely difficult to bear the financial burden of developing friendly countries at the same time as the investment burden of developing production,” the authors of the study quote one of respondents. The transfer of supplies to Asian markets was also accompanied by a pronounced decrease in the margins of Russian manufacturers – local importers in China demand a discount if they are the main buyer. This partly explains why exporters consider the near abroad and the Middle East to be more promising markets, while interest in the larger, but also more complex, according to exporters, markets of China, India, Turkey and the countries of Southeast Asia remains less pronounced

Tatiana Edovina, Dmitry Butrin, Evgenia Kryuchkova