Page 92 - RusRPTSept22

regime, Bloomberg reported on September 1, citing a Kremlin document detailing the plan that has not been made public.
The plan would relieve the upward pressure on the ruble which has become a problem for Russia, bringing the rate down from the current RUB60 to between RUB70-80 by the end of the year, say analysts.
A weaker ruble would also increase the amount of cash the government has to spend. One of the quirks of the Russian budget is that while expenditure is denominated in rubles, its oil revenues are denominated in dollars and then converted to rubles. That means if the ruble devalues converting dollar oil revenue creates more rubles for the government to spend. Oxford Analytics estimates a RUB10 fall in the exchange rate will generate an extra RUB 1.2 trillion ($20bn) for the budget.
The yuan is the favoured currency and Russia already has the largest share of yuan in its reserve basket make up which accounts for 17.7% to the total or about $100bn worth, according to the most recent report from the CBR.
The plan has already won preliminary approval from a special “strategic” planning meeting of top government and central bank officials including Governor Elvira Nabiullina on August 30, Bloomberg reports, citing people familiar with the talks.
Since sanctions were imposed on Russia, including the CBR sanctions and SWIFT sanctions that were imposed only days after Russia’s invasion of Ukraine in February Russia has been unable to spend its dollars and has begun a process of yuanization. Trading in the Chinese currency on the Moscow Exchange has soared and Russian banks have begun to offer yuan-denominated retail deposit accounts to the population.
The yuan made gains after the news broke as did the Turkish lira and India’s rupee, which are also candidates for the $70bn FX shopping spree.
“In the new situation, accumulating liquid foreign exchange reserves for future crises is extremely difficult and not expedient,” a presentation on the proposal prepared for the meeting said, cited by Bloomberg.
“The frozen $300bn were of no help to Russia; on the contrary, they became a vulnerability and a symbol of missed opportunities,” the presentation said.
Saving that money “is a direct reduction of investments in Russia in favour of investments in other countries,” the document said.
Problems with the plan However, the document and independent analysts pointed at several problems with the plan.
92 RUSSIA Country Report September 2022 www.intellinews.com