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Russia technically able to return FX controls

Russia's central bank is technically ready to re-introduce capital controls, should such a political decision be taken, but legislation changes would still be required, a central bank source said.

Prime Minister Vladimir Putin said last month he was against the idea of re-introducing capital controls, which were scrapped in 2006 as part of a path to a more open economy and an eventual currency free-float.

A number of officials - including Russia's top senator Sergei Mironov and the head of railway monopoly Vladimir Yakunin - have called for the re-introduction of such controls to protect the ruble, which has shed around a quarter of its value versus a euro-dollar basket since last summer.

“The instrument and technologies (for capital controls) were not put away in a distant drawer,” a central bank source told journalists late on Tuesday.

“So, for example, the transit account - which was used for compulsory sales of (foreign currency) earnings - has been kept. It is not working now, but it exists.”

Before capital controls were scrapped, Russia required that non-residents put money on deposit at the central bank when buying ruble-denominated securities, while exporters had to change a share of their foreign currency earnings into rubles.

The source said that any move to re-introduce such rules required two parts: a political decision and the presence of the necessary mechanisms to implement it.

“As for the central bank of Russia, we still have these mechanisms,” he said.

In neighboring Kazakhstan, parliament last week approved the first reading of a law streamlining the procedures for introducing currency controls, but the central bank said on Tuesday there were no plans to actually implement such measures (Reuters)