Starting today, June 13, 2024, the Moscow Stock Exchange has decided to abandon the use of the US dollar and the euro in some of its trading. This information was made public with a press release from the institutional website of the Bank of Russia.
The official statements of the press release
According to the press office of the Stock Exchange, “due to the introduction of restrictive measures against the Moscow Exchange Group by the United States, stock exchange trading and calculations of supply instruments in dollars and euros are suspended. At the same time, trading on all other trading segments and trading instruments in rubles and other currencies will be conducted as usual. Transactions with the US dollar and the euro will continue to be carried out in the over-the-counter market.”
The statement continues: “Businesses and citizens can continue to buy and sell US dollars and euros through Russian banks. All US dollar and euro funds in the accounts and deposits of citizens and businesses remain safe. The previous regime for issuing funds established by the Bank of Russia is maintained on deposits and accounts of citizens and organizations in US dollars and euros.”
A reaction to US sanctions and the role of China
The announcement was made the day before US President Joe Biden’s meeting with G7 leaders in Puglia, where the war in Ukraine will be a central topic. The US Secretary of State, Antony Blinken, explained that the sanctions aim to hit “many sectors essential to Russia’s war effort“, including energy, metals and mining production.
The suspension of trading in dollars and euros occurred following the announcement of new sanctions imposed by the United States. Russia, through the words of the spokeswoman of the Foreign Ministry, Maria Zakharova, reacted firmly by stating that “as always happens in these cases, Russia will not leave such aggressive actions unanswered”.
China was specifically included in the new sanctions measures for its support of Moscow. Blinken said “the United States remains concerned about the scope and breadth of exports from the People’s Republic of China supplying Russia’s military-industrial base.” Consequentially, sanctions will hit Chinese companies which provide essential goods for the Russian defense production cycle.
Over-the-counter market
As stated in the press release, despite the suspension, the Central Bank of the Russian Federation clarified that transactions in dollars and euros will continue to take place on the over-the-counter market. This type of market, not officially regulated, still allows the exchange of these currencies outside of traditional stock exchange channels.
To determine the official exchange rates of the dollar and the euro against the ruble, the Bank of Russia will use banking reports and information from over-the-counter trading platforms. This guarantees continuity in exchange operations despite the restrictions imposed.
Continuation of operations with other currencies
Trading with the ruble and other currencies will continue without interruption in the remaining market segments. The Central Bank reassured citizens and businesses, stating that “all funds in US dollars and euros in the accounts and deposits of citizens and businesses remain safe”.
Impact of the new sanctions
In addition to the Moscow Stock Exchange, the new US sanctions package it involves over three hundred companies. These measures aim to put more pressure on the Russian economy, but Moscow’s response indicates a determination to maintain stability and continuity in its financial markets.
