17 Jun 2022 10:17

Restricting Russian exports for sake of exchange rate would be strategic mistake - Belousov

ST. PETERSBURG. June 17 (Interfax) - Restricting exports from Russia for the benefit of the exchange rate would be a strategic mistake and the government, on the contrary, intends to expand the geography of exports in any way it can without hurting the domestic market, First Deputy Prime Minister Andrei Belousov told Interfax on the sidelines of the St. Petersburg International Economic Forum.

Earlier at the forum, Central Bank chief Elvira Nabiullina said that the value of exports should be reconsidered in the current environment and that production should be reoriented toward the domestic market by increasing the degree of product processing.

"We as a country currently lose from participating in the international division of labor, because we export at a discount and import at a premium. In these conditions, of course, I think we need to rethink what we also talked about but did not promote - the benefits from exports," Nabiullina said. The perception of exports as having intrinsic value because they generate foreign exchange earnings needs to be reconsidered in conditions where imported goods are not being purchased with these earnings, she said.

"We need to reconsider and, finally, think about the fact that a significant portion of production should work for the domestic market, process to a greater degree, create more end products," Nabiullina said.

"The first thing I would like to note is that the domestic market has always been the priority for us as regards expansion on foreign markets. If a shortage of some sort of products arose, the government imposed restrictive measures that impeded the shipment of scarce resources out of the country. You'll recall 2019, 2020, 2021, when amid a steep increase in world grain prices the government consciously restricted grain exports by imposing a special damper so as to satisfy the domestic market, ensure low prices. The same applies to obsolete scrap. As soon as there were risks of a shortage of obsolete scrap on the domestic market - this is an important feedstock for our metallurgy, electrometallurgy - the government also resorted to direct restrictions on exports," Belousov said.

"We recall mineral fertilizers, an important export commodity, when amid a shortage on foreign markets there were risks that a shortage will be felt on the domestic market and the government imposed a whole range of restrictions that ensure the priority of the domestic market. After domestic market demand is satisfied, the rest is exported. This is a general course, it did not appear now. There's nothing to rethink here, because the government already always acts this way, at least in recent years," Belousov said.

Commenting on Nabiullina's remarks, Belousov said he has "great respect" for the work being done by the Central Bank's leadership.

"The scale of the problems that they are now tackling - of course, not without mistakes, perhaps, but nobody's perfect, nonetheless, fairly confidently - deserves respect. But in this case, either the quote is simply inaccurate and taken out of context, or we're dealing with a strategic mistake. The president pointed this mistake out to us. He said Russia will by no means opt for self-isolation, that it's impossible to isolate Russia. What are we hearing now? That Russia should leave foreign markets. Why? Because we have excess foreign currency in the country, because this puts pressure on the ruble and so on and so on," Belousov said.

"As for exports, my position is that, on the contrary, we need to look for new export markets in these conditions, new niches for exports. Of course, not to the detriment of the domestic market, that's not what I'm saying. Today there is, indeed, a strong ruble, overvalued ruble that has strengthened to less than 60 rubles per dollar, which is one of the barriers to solving this challenge," Belousov said.

He said exports should in no way be seen only as a source of foreign currency. "Exports are foremost new opportunities for production, new jobs, the Russian Federation's position on world markets. It is well-known that politics follows economics. Why is China making huge efforts to increase its export potential, the United States, Europe, India, all the countries in the world? But in Russia, as is being quoted in the media today, supposedly the idea is emerging that we need to leave foreign markets and lock ourselves within our own borders. I think that we're probably talking about a misunderstanding here. It is unlikely that the Bank of Russia is pursuing such a policy," Belousov said.