Russian capital flows blocked as exports surge
Wednesday, August 3, 2022
Significance
Financial flows have all but halted because foreign investment is near-impossible and because capital controls and the risk of asset seizure abroad curb outflows. These dynamics, coupled with the lack of central bank intervention, have driven ruble appreciation. This undermines exporters' profit margins, domestic competitiveness and government revenues.
Impacts
- Russian capital is being redirected to new destinations, including the United Arab Emirates, Turkey and India as loans and investment.
- Interest rate cuts will take time to weaken the ruble, because channels for policy changes to shape real activity are operating abnormally.
- Creating new payment infrastructure for international transactions is a key policy priority for Moscow.
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