28 Feb 2022 13:12

Russia requires exporters to sell 80% of FX revenue, figure could top $400 bln by year's end

MOSCOW. Feb 28 (Interfax) - On the basis of proposals from the Finance Ministry and Central Bank of Russia (CBR) a decision was made on Monday to introduce mandatory sales of foreign currency revenue by resident participants in foreign economic activity in the amount of 80% of proceeds due to Russian residents under all foreign trade contracts, the Finance Ministry and CBR said in a statement.

VTB Capital analysts estimated that, at current prices for key Russian exports, these revenues will total about $600 billion this year on goods and $50 billion on services. Therefore, assuming that this measure will remain in effect for the rest of the year at a rate of 80%, mandatory forex sales will exceed $400 billion in 2022.

The CBR sold 84.8 billion rubles or about $1 billion worth of forex just in the first day of its intervention, on February 24.

The CBR eliminated mandatory forex sales by exporters in May 2006. Until now, the highest requirement for export revenue sales was 75%; it was introduced in December 1998 and was in effect until August 2001, when it was lowered to 50% and subsequently gradually reduced to zero in May 2006.

In July of that year, the CBR lifted the last restrictions on the movement of capital across Russian borders, eliminating requirements for provisions for certain types of forex transactions, as well as mandatory use of special accounts for conducting certain types of forex transactions. These steps by the financial authorities were in response to President Vladimir Putin's proposal to accelerate efforts to transition to a completely convertible ruble and conclude this transition by July 1, which he made in his annual address to the Federal Assembly in early May. As a result, the forex market in Russia was fully liberalized.

In recent years the Finance Ministry and CBR have taken steps to further liberalize forex regulations to ease the work of Russian exports. The CBR has periodically opposed the Finance Ministry's far-reaching proposals, arguing that it will not have the necessary information to control the situation on the forex market.

Nonetheless, the latest law in this area went into effect in July 2021, eliminating mandatory repatriation of foreign currency to the accounts of authoritized banks for non-resource, non-energy exports. This did not apply to foreign trade contracts for resource exports; in addition to oil and gas, the list included exports of fish, certain fish products, salt, sulphur, graphite, asbestos, ore, ferrous and nonferrous metal scrap, and pearls. Prior to this, Putin said in an address to the Federal Assembly that it was necessary to simplify forex control conditions for non-resource exports.