GENERICO.ruEconomicsThe sale of export proceeds was considered a secondary factor for the ruble

The sale of export proceeds was considered a secondary factor for the ruble

“Today the exchange rate is determined mainly by the dynamics of export-import flows”

In these first days of May, the ruble continues to slowly strengthen: on Thursday, May 2, the Russian currency reached 91 .12 per dollar. At first glance, there is a direct connection with the government’s decision to extend the requirement to sell export proceeds for a year. However, the role of this largely mystified tactical measure should not be exaggerated: fundamental macroeconomic factors influence the exchange rate to a much greater extent.

So, it has been officially confirmed: the validity of the presidential decree on the mandatory sale of foreign currency earnings by exporters has been extended until April 30, 2025. The requirement concerns a list of dozens of companies related to the fuel and energy sector, ferrous and non-ferrous metallurgy, chemical and forestry industries, and grain farming. The list is not disclosed. Let us remind you that the largest exporters are required to transfer at least 80% of the currency received from supplies to accounts in Russian banks.

According to First Deputy Prime Minister Andrei Belousov, last year the measure helped strengthen the ruble and made it possible to cover the shortage of foreign currency needed by importers to purchase goods abroad. The Central Bank, for its part, has repeatedly pointed out the destructiveness of these obligations for a number of companies. “Such restrictions complicate international payments, and, above all, payment for the necessary import of equipment,” said the head of the regulator, Elvira Nabiullina. The decision to prolong the measure is considered unnecessary by the Central Bank, citing the instruments available to it for stabilizing the exchange rate, primarily the key rate.

One thing is clear: the requirement to sell export proceeds cannot be considered a panacea. It cannot cope with fundamental force majeure circumstances, such as geopolitical and sanctions risks, the increasing complexity and cost of logistics, and problems in mutual settlements with friendly countries (primarily in trade with China), which have sharply increased in recent months due to the threat of secondary sanctions.

“Yes, the ruble is strengthening, but this is largely due to the current, temporary situation – the traditional tax period, which, due to the holidays, turned out to be slightly shifted from April to May,” says Nikita Maslennikov, leading expert at the Center for Political Technologies. – Now domestic companies are actively selling foreign currency, which they did in previous days. As for extending the validity of the presidential decree for a year, from the point of view of its influence on the exchange rate, this measure is clearly not the main one. Rather, we can talk about its tactical, technical, auxiliary nature: it allows you to take a breath, reduce tension in the foreign exchange market, strictly control the dynamics of additional oil and gas revenues, the implementation of the budget rule, and the transfer of currency to the National Welfare Fund.

Today, the exchange rate is determined mainly by the real dynamics of export-import financial flows, with which not everything is in order. Due to the risks of secondary sanctions, payments are stuck in banks in China, Turkey, the UAE and other friendly countries. And in the case when the Chinese side pays for supplies from the Russian Federation not in its systemically important banks, but in small regional ones, this costs Russian producers more. In addition, such transactions take significantly more time. As a result, the gap between delivery and payment grows, sometimes reaching a month or two. According to Maslennikov, a classic paradox arises: balance of payments statistics record the picture of the foreign trade balance and current account on the date of execution of the contract (change of ownership), but in reality the exporter does not receive any money. Under these conditions, the Russian government had to extend the period for crediting foreign currency earnings to the accounts of exporters from 90 to 120 days.

“Another problem, largely underestimated, is associated with the transition to payments in national currencies,” says Maslennikov. – What to do if Russia’s trading partner absolutely does not need the rubles or yuan it offers, he only asks for dollars? On the one hand, the structure of payments in national currencies – This is the spirit of the times, with a perspective for many years, on the other hand, it is far from the most optimal scheme. It is not entirely clear how great the impact of these realities on the dynamics of the exchange rate is.”

Last year, a decree on the mandatory sale of foreign currency earnings by exporters made it possible to saturate the domestic market, which, in turn, stopped the devaluation of the ruble. Then the fall in the exchange rate of our national currency was stopped at around 100 rubles per dollar – and now we see quotes in the region of 91-92, says financial analyst Fedor Sidorov. In general, the positive forecast for the Russian economy and financial system is now based on windfall profits from oil and gas. At the same time, experts are inclined to believe that in the next three years, quotations of the Russian Urals grade will drop to $65 per barrel. And this will already have a noticeable impact on budget revenues. 

«A high level of imports with limited exports and reorientation towards domestic demand will increase the overheating of the economy, increased investment activity will accelerate inflation, and the high key rate of the Central Bank (designed to fight inflation) – “wash out” currency from the domestic market, albeit indirectly,” sums up Sidorov. – So, extending the validity of the decree will not dramatically affect the ruble exchange rate, although it will slow down the weakening trend: pro-inflationary factors play the main role here.”

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