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 The government put pressure on state-owned exporters on Tuesday to
sell dollars while officials and banking sources said the central
bank had installed supervisors at the currency trading desks of top
state banks.
Shortly after the market opening, the rouble hit 52.88 to the
dollar, its strongest level since Dec. 8. By 0725 ET, it had fallen
back but was still was up 2.3 percent at 54.52 <RUBUTSTN=MCX>.
Analysts said the measures were effectively a softer version of
capital controls, adding that they did not believe President
Vladimir Putin, who has drawn much of his popularity from financial
stability and rising prosperity, would break his pledge not to
resort to full-fledged controls.
Russians have followed hard currency movements closely ever since
hyperinflation destroyed their savings after the collapse of the
Soviet Union, just before Putin came to power.
The rouble plunged to an all-time low in mid-December on the back of
lower oil prices and Western sanctions, which make it almost
impossible for Russian firms to borrow from the West.
Former finance minister Alexei Kudrin warned on Monday that Russia
was heading towards a full-fledged economic crisis.
The rouble fell to as low as 80 per dollar this month, from the
average of 30-35 seen in the first half of the year, but has since
recovered to trade as high as 52.88 to the dollar on Tuesday.
On Tuesday, the government asked top state exporters to sell part of
their hard currency revenues on the market, a government source told
Reuters.
UNOFFICIAL CONTROLS
"Of course, the companies are free to hold on to the hard currency,
they are also free to get involved in speculative operations. But
then we reserve the right not to help them if and when they hit
tough times," said a government source who asked not to be named.
He said companies that needed to repay large foreign debts could
continue to accumulate hard currency.
"If exporters are told not to increase their hard currency
positions, it can be viewed as an unofficial reintroduction of
capital controls," said Vladimir Osakovsky from Bank of America
Merrill Lynch.
Liza Ermolenko, an emerging market economist at Capital Economics in
London, said: "I don't think we can call them capital controls as
such ... Capital controls is a very strong policy and if they
decided to do it, it would be known."
Limiting money flows, once considered a damaging constraint on open
markets, has been more accepted in the aftermath of the 2008-2009
financial crisis as a tool sometimes needed to manage financial
stability.
But in Russia, the issue is a political one. Capital movements were
liberalized only 10 years ago and any restrictions bring back
memories of the chaotic post-Soviet financial turbulence which
Putin, now in his 15th year as Russia's paramount leader, made it
his mission to banish.
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"(Full capital controls) would be a huge immediate blow to the
economy," Mikhail Zadornov, chairman of the board of VTB-24 bank,
told the newspaper Vedomosti in an interview on Tuesday.
"It would intensify capital outflows and cause a complete loss of
confidence in the country among both domestic and foreign
investors."
PRAGMATIC APPROACH
Instead, Russian authorities are taking a more pragmatic approach.
Four banking sources and sources close to the government said that
the central bank had last week begun sending supervisors to monitor
currency trading at major Russian banks.
"There was panic," said a source close to the government. "Something
had to be done and we took some measures."
The central bank expects net capital outflows to hit $130 billion
this year and Russia can ill afford to lose any more, with
economists forecasting that an already slowing economy will shrink
3.6 percent next year.
"Yes, we have to report all of our activities to them, they are very
meticulous," said a source at a bank among Russia's top five.
Another source at a large bank said: "As of Monday (Dec. 16),
currency comptrollers have been sitting in and monitoring our
currency positions, checking who bought foreign currency."
The central bank declined to comment on this, telling Reuters only
that it would hold talks with exporters about maintaining stability
on the foreign exchange market.
Traders said Tuesday's rouble rise was due partly to the government
orders and partly to regular tax payments, which require exporters
to sell dollars or euros for rubles. The tax payments are likely to
peak around Dec. 25.
The newspaper Kommersant said, citing unnamed sources, that the
companies asked by the government to sell hard currency included the
gas firm Gazprom <GAZP.MM>, the oil firms Rosneft <ROSN.MM> and
Zarubezhneft, and the diamond producers Alrosa and Kristall.
Kristall confirmed to Reuters that it had received the instruction.
One other company from the list also confirmed the instructions, but
asked not to be named.
(Additional reporting by Oksana Kobzeva, Vladimir Abramov and Polina
Devitt; Writing by Dmitry Zhdannikov; Editing by Kevin Liffey)
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