The Russian ruble (RUB) exchange rate is subject to a controlled float regime, referenced to a currency basket of the US dollar and the euro. Despite the impact of economic sanctions by Western governments due to the conflict in Ukraine, as well as falling global oil prices that have together seen capital flee the country and reduced export earning, the government maintains that it has no intention of re-imposing capital controls. Sending money to Russia remains unproblematic; however, there may be some bureaucratic hurdles to transferring money out of Russia, and it is unclear how the situation will evolve in light of major devaluation of the ruble in December.
Capital controls were abolished in 2006. There are no express controls on capital account transfers, including foreign direct investment and portfolio investment. Passive income such as dividends, interest and royalties may be freely transferred abroad. Customs approval is required on certain types of overseas money transfers, particularly for import-export and loan agreements; generally speaking, approval is only required if the transaction value is over US$50,000. Despite the ruble plunging to record lows in late 2014, the government has ruled out the possibility of imposing capital controls. However, given the ever-changing nature of the political, economic and investment context, this may yet change. The ruble is a fully convertible currency, and there are generally no restrictions on its conversion to foreign currencies. That said, while large multinational firms with diversified global operations can generally avoid capital restrictions, smaller businesses are experiencing severe shortages of foreign currency.
The Central Bank of the Russian Federation (CBR) manages Russia’s monetary policy, regulates the financial system, including the banking sector and foreign exchange market, and works to ensure the stability of the ruble (RUB). In a bid to stem the ruble amid accelerating capital flight in 2014 - US$85.2bn in the nine months to September - the CBR has intervened heavily in the foreign exchange markets. By mid October, central bank intervention had depleted foreign exchange reserves by US$68bn to US$443.8bn. Such heavy intervention has led to the central bank to revise the trading band for the RUB against the USD several times. The central bank originally planned to move the ruble to a free-float regime by early 2015, but it abandoned these plans after the currency’s value plummeted in mid-December 2014.
Monetary authorities eliminated remaining controls on money transfers coming to and from Russia in 2006, having imposed them in 1998 when the ruble’s decline led to a default on sovereign ruble-denominated debt. The imposition of economic sanctions in 2014 caused many investors to withdraw their money from Russia; some estimates put capital flight in the first three quarters of the year at over US$100bn. Nonetheless, the central bank has stated many times that that it does not plan to reinstate capital controls in order to prevent these losses.
Foreign-held property will also be a sensitive, and likely changing, issue in the context of economic sanctions. A member of the Russian Federation Council indicated in March 2014 that the council may draft legislation that would permit property, accounts and other assets held by American and European companies to be confiscated.
Corruption remains an obstacle in Russia’s business community; while this has minimal effect on overseas money transfers, it is an important factor to consider for foreign investment and other financial operations, and we recommend working only with authorised service providers.
Russia’s position in the global economy and the foreign exchange market has been profoundly impact by its annexation of Crimea in March 2014 and the ensuing conflict with neighbouring Ukraine. The United States and the European Union have applied several waves of sanctions in an effort to discourage Russia’s aggressive foreign policy; while measures have fluctuated over the course of 2014, they include restrictions on certain Russian officials and organisations and strict licensing controls on exports to the region.
The conflict will have a significant impact on Russia’s foreign trade. Bilateral discussions with the US that aimed to expand trade and investment channels were halted as a result of the conflict. Major credit companies such as Visa and MasterCard have also blocked some transactions in Russia. In September, France halted the sale of two Mistral assault ships to Russia under a previous arms sale contract.
In response to the growing pressure, Russian authorities have introduced a number of measures restricting resident individuals and corporations from investing abroad, which may help to offset lower transfers of foreign direct investment (FDI) in the near-term.
The ruble (RUB, ₽) consists of 100 kopeks. Banknotes are printed in denominations of ₽5, ₽10, ₽50, ₽100, ₽500, ₽1,000 and ₽5,000. Coins are minted in denominations of 1, 5, 10 and 50 kopecks, as well as ₽1, ₽2, ₽5, ₽10 and ₽25.
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