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changers, trying to buy foreign exchange while stocks last.
“Russia’s war economy is deeply isolated from the international financial system, leaving the Kremlin’s military desperate for access to the outside world,” said Secretary of the Treasury Janet L. Yellen. “Today’s actions strike at their remaining avenues for international materials and equipment, including their reliance on critical supplies from third countries. We are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services. Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine.”
The ruble was unaffected by the change, trading at RUB90.9 to the dollar as of the close of trading on June 12, slightly weaker than the RUB89.2 it was trading at the end of trading on June 11. (chart).
Most Russians hold some portion of their savings as FX as insurance against regular exchange rate volatility and banks hold billions of dollars and euros in retail deposit accounts. The CBR was quick to announce these deposits are in no danger and will be unaffected by the suspension of FX trading, in an effort to head off a possible run on bank deposits.
"Companies and individuals can continue to buy and sell US dollars and euros through Russian banks," the CBR said in a statement. "All funds in US dollars and euros in the accounts and deposits of citizens and companies remain safe."
What do the sanctions mean?
Adding the Moscow Exchange, the National Clearing Center (NCC) and the National Settlement Depository (NSD) to the Specially Designated Nationals and Blocked Persons (SDN) List means isolating a company from the global dollar system. It is not surprising that the sanctions forced the Moscow Exchange to immediately announce a halt to trading in dollars, euros and instruments denominated in these currencies. In fact, half of all foreign exchange trading on the exchange has been stopped.
The exchange will continue trading in other currencies, primarily the yuan, but this will depend on how large Chinese banks behave. If they refuse to work with the sanctioned Moscow Exchange, NCC and NSD, exchange trading in the yuan will also become impossible. Then the only way to sell and buy currency (for example, within the framework of the budget rule) may be a system of authorized banks: the Central Bank sells yuan to one of the special non-sanctioned banks, and it then trades further. A similar system worked in the foreign exchange market in the 1990s.
The first time the United States spoke about restrictions on the work of NCCs
98 RUSSIA Country Report July 2024 www.intellinews.com