In a recent development, Russian President Vladimir Putin addressed concerns surrounding the Russian rouble’s temporary decline. During an economic conference in Vladivostok, Putin reassured the nation and the world that the government has no immediate plans to implement further capital controls to stabilize the currency, as reported by Bloomberg. This announcement comes amidst discussions about the rouble’s volatility and the challenges it poses.
Putin’s Soothing Words
Speaking at the conference, Putin expressed his belief that the currency’s volatility is “manageable.” He explained that the supply of foreign currency has been constrained due to exporters being cautious in repatriating their profits from abroad. Putin emphasized the need for cooperation with the business community, urging them to understand that working within Russia is a secure option. In his own words, “Nothing drastic needs to be done.”
Controversy Over Capital Controls
The debate over capital controls in Russia has been contentious. However, given the recent signs of the rouble’s stabilization, the necessity for imposing restrictions on the flow of money has diminished. The rouble, which experienced the third-largest loss among developing markets this year, is now showing signs of recovery, despite a minor dip against the dollar during Putin’s speech.
Vladivostok Economic Conference
Putin’s annual economic conference in Vladivostok, initiated in 2015, aims to attract investment and foster relationships with Asia-Pacific nations. Over the years, the event has evolved to reflect Russia’s shifting dynamics, particularly its growing reliance on trade with Asia. This year, notable participants included the Vice President of Laos and Zhang Guoqing, the Vice Premier of China, who engaged in discussions with Putin.
In the lead-up to his meeting with Putin, North Korean leader Kim Jong Un visited Russia. While it remains uncertain whether he will attend the conference or engage in talks, his presence signifies the event’s international significance. In 2022, one prominent attendee was Min Aung Hlaing, the leader of Myanmar’s junta, who faces US sanctions for alleged human rights violations.
Themes of the Forum
This year’s forum, according to Putin’s remarks posted on the event’s website, will emphasize expanding international trade, investments, and technological and scientific collaborations. These themes reflect Russia’s determination to enhance its global engagement.
Factors Affecting the Rubel
Several factors have contributed to the rouble’s challenges, including a decline in the value of energy export receipts, increased imports, and a shift away from settling trade in the dollar and the euro, which has reduced the flow of foreign currency into Russia.
Late last month, when the Russian rouble briefly exceeded 100 per dollar, concerns about capital controls resurfaced in Moscow. In response, officials took informal measures to ensure an adequate supply of foreign currency in the domestic market.
The Central Bank’s Actions
Prior to the rouble’s decline, Putin had cautioned about rising prices and urged measures to prevent capital flight and reduce market volatility. In August, when the rouble faced significant selling pressure, the central bank announced it would cease buying foreign currencies for the remainder of the year, followed by a sharp increase in interest rates during an emergency meeting.
However, the rouble remains highly volatile, impacted by decreased foreign commerce and numerous international sanctions related to Russia’s involvement in the conflict in Ukraine.
Upcoming Policy Review
This Friday marks the next policy review by the Bank of Russia. The central bank recently raised its benchmark rate from 8.5 percent to 12 percent, marking the second consecutive hike and the sharpest increase since Russia’s invasion of Ukraine in February 2022. Putin acknowledged that this significant rate hike was partly driven by a slight rise in inflation.
As Russia navigates its currency challenges and global economic dynamics, Putin’s reassurance and the rubel’s recent stabilization offer a glimmer of hope for the nation’s financial stability.