Putin Signals Confidence in Ruble, ‘Nothing Drastic’ After Crash

Russian President Vladimir Putin struck a reassuring tone over the outlook for the ruble after a brief crash last month, signaling the government isn’t moving to impose tighter capital controls to stabilize the currency.

(Bloomberg) — Russian President Vladimir Putin struck a reassuring tone over the outlook for the ruble after a brief crash last month, signaling the government isn’t moving to impose tighter capital controls to stabilize the currency.

The ruble’s volatility is “manageable,” Putin said during a speech at an economic conference in the Pacific Russian port city of Vladivostok on Tuesday. At the same time, exporters have been “restrained” in bringing back their revenues from abroad, putting a squeeze on the supply of foreign exchange, he said.

“We need to somehow come to an agreement with business — they have understand and proceed from the fact that it is safer to work here,” Putin said. “Nothing drastic needs to be done.”

Russia has been split on the issue of capital controls but is under less pressure to resort to curbs on the movement of money as the ruble shows signs of stabilizing after what’s been the third-biggest depreciation in emerging markets this year.

As Putin spoke, the currency pared gains against the dollar but is still on track for its third straight day of gains.

Putin is continuing to hold his annual showcase in Vladivostok, started in 2015 to attract investment to the region and build ties with Asia-Pacific powers. But an event headlined by Indian Prime Minister Narendra Modi in 2019 has been sinking into irrelevance, with foreign attendance suffering during the pandemic and senior officials from abroad mostly absent since Russia’s invasion of Ukraine last year.

Despite Russia’s growing reliance on trade with Asia, the event has come to reflect Russia’s isolation, featuring the vice president of Laos as the most prominent guest to appear this year during a plenary session with Putin. Chinese Vice Premier Zhang Guoqing is also attending the forum and met Putin on Tuesday.

North Korean leader Kim Jong Un crossed into Russia on Tuesday ahead of his summit with Putin, though it wasn’t clear if he’ll attend the conference or hold talks on its sidelines. Myanmar’s junta head Min Aung Hlaing, who’s sanctioned by the US for alleged human rights violations, was one of the main attendees in 2022.

One of the themes for this year’s forum will be expanding international trade, investments, scientific and technical cooperation, Putin said in an address published on the forum’s site.

A shift toward settling trade in currencies other than the dollar and the euro has also cut into the flow of hard currency into Russia just as the value of revenues from energy exports slumped during a recovery in imports.

The Russian currency’s brief plunge above 100 per dollar late last month revived a debate in Moscow about capital controls, with officials opting for informal measures to ensure enough foreign exchange is available in the domestic market. 

Putin previously demanded steps to control the outflow of capital from Russia and to reduce volatility in financial markets, warning of the threat from rising prices following the slump in the ruble.

When the ruble came under intense selling pressure in August, the central bank announced it would refrain from foreign-currency purchases for the rest of this year and then delivered a steep hike in interest rates at an emergency meeting.

But the currency has remained highly volatile, suffering from a deterioration in foreign trade amid a raft of international sanctions over the Kremlin’s war in Ukraine. 

The Bank of Russia is next scheduled to review policy this Friday after lifting its benchmark to 12% from 8.5% a month ago, the second straight increase and the sharpest since the immediate aftermath of Russia’s invasion of Ukraine in February 2022. 

Putin said the central bank “was forced” to enact the steep rate hike, partly “because inflation began to rise slightly.”

‘Right Thing’

“I think it did the right thing, in a timely manner,” he said. “Yes, this reduces opportunities for lending and slightly hinders economic development, but it is a significant factor in reducing inflation risks.”

Bank of Russia Governor Elvira Nabiullina has said policymakers are “unlikely” to lower rates during its coming meetings.

Putin echoed the central bank by citing increasing imports for driving up demand for foreign currency. The “repatriation or non-repatriation” of foreign proceeds by exporters may have been among other factors, he said.

“In general, I don’t think that there are any completely insurmountable problems and difficulties here,” Putin said. “These are controllable factors. We see them, we understand them.”

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