Russian ruble routed as foreign capital takes flight

New Delhi: After months of relative stability, the Russian ruble continued to decline sharply against the dollar and other major currencies on Friday. Analysts attribute this trend to rising imports and a sharp increase in capital flight from the country. The Russian ruble fell this week to its lowest point since last April. According to the Moscow Stock Exchange, it was trading over 83 rubles to the dollar and over 91 rubles to the euro on Friday. The conclusion of the Russian tax year, when big exporters often exchange foreign currency for rubles to meet their payment commitments to the state budget, was previously cited by analysts as the reason for the depreciation of the ruble, reported The Moscow Times, citing RBC business daily. At the same time, the ruble is facing pressure from trade inflows as imports gain momentum and exports continue to decline. But President Vladimir Putin’s recent approval of a deal that permits British energy giant Shell to offload its stake in the Sakhalin-2 oil pipeline project in Russia’s Far East has added to the mix of forces pulling down on the ruble. The arrangement allows Shell to transfer over 94 billion rubles ($1.2 billion) in proceeds from its pipeline project sale abroad. Novatek, Russia’s second-largest natural gas producer, is set to acquire the stake as part of the deal, according to The Moscow Times report. Scores of foreign companies have pulled out of Russia since Moscow launched its invasion of Ukraine last year despite being banned from selling their assets in Russia without approval from a special government commission. According to Bloomberg, foreign companies leaving Russia last year collectively sold assets worth between $15 billion and $20 billion. Around 2,000 foreign companies are waiting to receive permission from the Russian government to sell their Russia-based operations and repatriate capital abroad. “Judging by the low liquidity of the currency market, but also the lack of transparency in approving these kinds of deals, all of this will lead to increased volatility against the dollar and euro,” The Moscow Times quoted economist Gregory Bazhenov as writing on Telegram. Russian Finance Minister Anton Siluanov did not mention capital outflows caused by the exodus of foreign companies as among the factors contributing to the ruble’s recent depreciation, arguing instead that a slump in export revenues and increased imports were to blame. “The change in the exchange rate is connected to the trade balance. Therefore, these changes are connected with either an increase in imports or a slight decrease in export revenues. In recent months we’ve seen trends in both directions,” he told state media on Thursday. Siluanov expressed hope that the ruble would strengthen again once oil prices rise. Since the February 2022 invasion of Ukraine, Russia’s oil export revenue has helped insulate the country from the immediate impact of sanctions. The country pulled in an estimated $218 billion from oil exports in 2022, a 20 per cent increase from the previous year. This influx of cash helped Moscow defend the ruble and shore up its hard currency reserves. In February, the Central Bank of Russia relaxed currency controls for exporters in the non-commodity and non-energy sectors. The restrictions were introduced last year to prevent runaway capital flight and the rapid depreciation of the ruble. With inputs from agencies Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.