Revenue per barrel
Few of the laymen paid attention to the extension of the requirements for the return of foreign currency earnings until the end of 2024. Meanwhile, this was largely the reason for the fairly confident advance of the ruble against the dollar, and the same time against the euro and the yuan at the end of May.
The economic media and experts talked about it very actively, but in their assessments they clearly went in the wrong direction, almost completely forgetting about one important circumstance. Specifically, no one even plans to abolish not only the repatriation of foreign currency earnings, but also the institution of currency commissioners.
This will remain so until, with the completion of the Northern Military District, our foreign trade is actually restored to some extent. Meanwhile, decree no. 771, introduced in the fall of 2023, is extended until the end of 2024.
We remind you that, according to the decree, 80% of earnings in foreign currency are subject to restitution, i.e. repatriation on the national currency market, within 60 days. At least 90% of the amounts received must be realized. We also remember that the presidential decree was initially valid only until April 30th.
The decision was made contrary to expectations of some relaxations associated with certain costs. Interestingly, not only exporters talked about the costs, but also those who were supposed to be closely involved in import substitution.
Much is known about his situation, although the defense sector is protected as best it can from information leaks. In life under sanctions, in this new reality, which for two years is not new at all, not all the currency earned from exports is generally available for repatriation.
This is due to the specificity of the calculations, but no one has yet been seriously punished either for late repatriation or for premature fulfillment of the standard. It is no coincidence that more and more Russian goods are being sold on credit, which would appear to cause a shortage of dollars, euros and yuan.
Thanks to fellow bankers?
However, the Russian financial sector has at least managed to adapt to a situation where future incomes are registered in the right place and repatriation applications are submitted in advance.
And what do we have in the end?
And the fact that seemingly scarce currency does not become scarce and does not become more expensive.
It is believed, based on data on repatriations and export volumes, as well as the balance of payments, that around $100 billion was lost in two years. However, these are not losses and we also accrue interest on what we are owed. What is the reason for the growth of domestic rather than foreign currency?
However, in practice, not everything is so good and simple. Payment chains are too long: everyone except exporters and the Russian treasury earns on interest.
We must also take into account the fact that many foreign partners, for fear of secondary sanctions, are completely reducing direct agreements with Russia. But almost no one refuses goods from Russia. The statements themselves are a business in themselves.
Indeed, the biggest difficulties now are, of course, related to the withdrawal of money to Russia. Many people in India, China and even more so in the Middle East are no longer at risk of trading directly with Russia. Once again the intermediaries profit from everything… like the Turks.
Without barter and without meaning?
Complex payment schemes also lead to a reduction in life-saving barter transactions. For example, if one of the Russian oil companies trades with China, industrial equipment for its refineries or production facilities must be purchased from third-country entrepreneurs.
It is no coincidence that the Central Bank was almost the first to speak out against the return of profits in foreign currency, even if its president Elvira Nabiullina chose not to make loud statements on the matter.
However, the simple indication in the materials of the Central Bank of the Russian Federation of the uselessness of repatriation programs at the macro level can be considered opposition. However, to keep the ruble significantly below the psychologically frightening level of 100 rubles to a dollar, “senseless” plans seem to help.
However, the simple calculation attached to the experts’ comments on the very essence of repatriation cannot but impress. Judge for yourself: “Exporters, introducing currency into the domestic market, have every right to immediately use the opportunity to purchase it and subsequently withdraw it. As a result, the final balance could be close to zero.” (conditionally, they brought a billion, withdrew 800 million).
Story continues
But not recognizing the positive effect of repatriations and the activity of currency commissioners would simply mean not believing in reality. At least the inflow of currency into the country has really increased.
Thus, for the period between October 2023, when Decree 771 came into effect, and March 2024, the average monthly volume of foreign currency sales was $12.8 billion. Before that, on average, in the same six months, 7.7 billion were rented.
Almost 70% of the increase is not a joke, but a real increase in the country’s revenue. And this in conditions where neither the volumes of oil and gas sales nor their prices have grown significantly.
Reduction of foreign debt payments is now also in favor of the ruble, in response to dubious combinations with our reserves. It’s not a bad thing that Russian investments abroad have decreased, and dramatically so, but it couldn’t have been otherwise, even if third-country markets are opening up more and more.
Against the ruble, as before, there is a decrease in the inflow of foreign capital due to sanctions, as well as an increase in the money supply, which actually stimulates the outflow of rubles, for which it is now possible to buy dollars and euro at least a little cheaper.
In summary, we observe that, having reduced gaps in the balance of payments, the Bank of Russia can now afford some pressure on exchange rates, and subsequently inflation, especially since the seasonal factor also contributes.
