Putin signs classified executive order to bolster the ruble, compelling industrial export companies to divest of foreign currency revenues
The Putin administration announced on Wednesday that the president has signed an executive order compelling certain categories of export companies to divest themselves of foreign currency revenue from foreign trade. The order’s stated purpose is to stabilize and bolster the Russian ruble.
The president’s decision will affect 43 different groups of companies working in the metallurgy, fuel and energy, and chemical industries, as well as grain and timber production.
According to a press release outlining the key provisions of the executive order, companies in these categories will have to sell the U.S. dollars, euros, and other foreign currency received in revenue for exported goods, on a schedule set by the government.
The regulation also calls for regular reporting to Russia’s Central Bank and the Federal Financial Monitoring Service. In addition, certain companies will have to open up staff positions for internal federal monitors who will oversee compliance with currency regulation.
Since the publication of the press release, the market remained in suspense, expecting that the full text of the regulation would soon be published. Despite those hopes, today the Kremlin spokesman Dmitry Peskov said that the president’s order is classified “for internal use only” and its full text will not be made public, “for obvious reasons.”
This lack of transparency will likely make it difficult to judge the policy’s effectiveness in bolstering the ruble, writes the independent reporter Farida Rustamova of Faridaily media. Secrecy, she explains, will make it impossible to find out which companies were compelled to divest of foreign currency, in what amounts, and when.
Rustamova suggests that uncertainty arising from secrecy about the executive order is likely to undermine the ruble.
A similar opinion was voiced by the Bloomberg economist Alexander Isakov, who pointed out that the positive effect of currency divestment is unlikely to have much staying power. At the same time, he said, market agents should be concerned about the regulation potentially encouraging capital flight and ultimately weakening the national currency instead of helping it.
At the close of trade in Moscow on Wednesday, the U.S. dollar traded above 100 Russian rubles.
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