Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 07 Apr 2022 by Alexander Kudrin

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The Russian ruble has bounced back in recent days/weeks as more sanctions were announced and a great number of Western exporters terminated their business with Russia. Demand for imports in the country fell and amid a sort of capital controls combined with increased risk of holding money outside of Russia reduced the demand for FX. Exports have also significantly declined, but the current surplus was probably quite strong in March. The CBR will publish its estimate of the 1Q22 balance of payments on April 11, and this publication will give more information on the impact of Russia’s mission in Ukraine on its economy. As the demand for FX fell, banks’ net position with the CBR improved, so that the structural liquidity balance of the banking sector was positive in recent days and the ten-day average level moved to around zero.Despite the presence of the OFAC license, which allowed the Finance Ministry to provide coupon payments in March and which expires only on May 25, the US authorities decided to prohibit the Russian Government from using frozen reserve accounts for debt servicing and redemption. As a result, the correspondent bank was not able to proceed on April 4 with the coupon payment on Russia 42 and redemption Russia22. Interestingly, the Finance Ministry bought back more than 72% of Russia 22 (which were kept in local depositary) with settlements in Rubles, in such a way the bulk of remaining holders of this paper are international investors. According to amended procedures, published at the beginning of March, the Russian Government paid all necessary amounts in rubles at the current exchange rate. The problem is that this money was transferred to NSD (local ...