Russia is reportedly imposing new currency controls in a bid to bolster its waning rouble, placing limitations on Western businesses wanting to exit the country after its invasion of Ukraine.
According to a recent report by the Financial Times, international corporations looking to leave Russia in light of the recent political climate are now obligated to sell their assets in roubles. Those insisting on foreign currency transactions may encounter extended delays or even face potential losses during the transfer of funds abroad.
The rouble’s decline has been prominent since Russia’s controversial move into Ukraine in February of the previous year. Such actions prompted Western nations to enforce sanctions against Russia, delivering a blow to its economic framework and causing its currency to spiral. As of this year, the rouble has depreciated over 20% against the dollar, notably breaching the psychologically pivotal benchmark of 100 roubles to the US dollar in August.
Although there was a brief recovery after Russia hiked interest rates and executed export controls later that month, the rouble again dipped beyond the 100 mark in early October. “The rouble has lost more than 20% of its value against the dollar this year,” stated the Financial Times report.
Russia’s central bank hasn’t been idle amidst this monetary turbulence. It has ramped up interest rates on four occasions since August in efforts to stabilize the currency and curb inflation. The most recent increase, surpassing expectations, brought the rate to 15% last Friday.
Earlier this month, in a notable move, President Vladimir Putin signed a directive obliging 43 companies to liquidate some of their foreign currency proceeds within Russia. Presently, the exchange rate hovers around 92 roubles to the dollar.
Several multinational corporations have made the decision to either scale down or exit their operations in Russia following the invasion of Ukraine. This list includes notable names like Starbucks, McDonald’s, Shell, BP, and Carlsberg. Carlsberg’s attempt to sell its Russian subsidiary, Baltika, was stymied when Putin ordered a temporary confiscation of the stake.
Carlsberg’s newly appointed CEO, Jacob Aarup-Andersen, who stepped into his role in September, expressed firm sentiments on the matter on Tuesday. “There is no way around the fact that they have stolen our business in Russia, and we are not going to help them make that look legitimate,” Aarup-Andersen stated. It’s worth noting that Carlsberg managed eight breweries in Russia and had a workforce of 8,400, resulting in a staggering 9.9bn Danish kroner write-down on Baltika the previous year.
When probed about the Financial Times report, Kremlin spokesperson Dmitry Peskov emphasized that the demands for payments in roubles from departing Western companies were unrelated to the currency’s current fluctuations. Contrary to concerns, Peskov assured that Russia remains receptive to foreign investment and is committed to fostering a favorable business milieu for overseas enterprises.
In a statement to the Financial Times, Peskov remarked, “It is the duty of every government to create the most favourable conditions for its currency, so we create the most favourable conditions for the rouble.” Elaborating further, he emphasized, “the rouble has absolute priority” and stated that Russia operates based on “its own interests and benefits.”
The recent instability of the rouble, according to Moscow, can be attributed to a decline in export volumes coupled with an amplified internal demand for imports.