Page 11 - RusRPTNov23

What is happening in the Middle East has temporarily overshadowed fundamental factors that investors should not forget about. So, this week the next monthly reports from OPEC and the IEA will be released, as well as data on US inventories.
Missing the headlines was OPEC’s long-term forecast, released the day before, directly contradicting the IEA’s predictions of a demand ceiling for fossil energy resources in 2025 and for oil in 2030. According to OPEC, demand for oil will continue to grow for another 20 years, during which time oil will hardly reduce its share in the global energy balance, and renewable sources will only replace coal. The fundamental difference between the forecasts lies in the required investments in the industry. OPEC estimates them at $14 trillion by 2045, the IEA calls for abandoning the “oil industry” and increasing investments in “clean energy” to $2 trillion per year.
2.3 Government building more permanent capital controls system
The Russian government is actively constructing a comprehensive capital control system, marking a significant development in its economic policies. Prime Minister Mikhail Mishustin recently alluded to the government's efforts to implement systemic solutions in its dealings with foreign counterparties, particularly in cooperation with the Central Bank.
While detailed information regarding the capital control system remains undisclosed, it appears to be related to a recent order issued approximately one month ago. This order pertains to a list of more than 30 countries whose banks and brokers will be granted permission to engage in trading activities on the Russian foreign exchange market.
The government published a decree, which aligns with a presidential decree regarding the mandatory sale of foreign currency earnings. This decree carries significant implications for the Russian ruble. In essence, it obliges 43 exporters from a specified list to deposit at least 80% of the currency they receive under export contracts into Russian banks and subsequently sell a minimum of 90% of these amounts within the domestic market.
Equally important is the requirement that exporters ensure compliance with these foreign currency earnings regulations by their subsidiaries, including those registered abroad. Potential flexibility in these requirements is contingent upon a government commission's evaluation, although such flexibility is limited to the extent that the company repays its external debt.
Reports suggest that this strict control over foreign exchange flows will become a permanent fixture, replacing the current six-month validity period for these measures. Additionally, the Ministry of Finance is contemplating the imposition of obligations on companies, effective from January 1, to declare foreign assets and liabilities, including those held by subsidiaries. The Ministry has refrained from offering official comments on this matter.
11 RUSSIA Country Report November 2023 www.intellinews.com