Putin demands export payments in rubles

Central bank governor Elvira Nabiullina reportedly tried to resign after invasion but was told to stay by Russian president
Vladimir Putin and Elvira Nabiullina meet at the Kremlin
Vladimir Putin and Elvira Nabiullina

Russian president Vladimir Putin insisted that foreign countries that have imposed sanctions on Russia must now pay for energy imports in rubles today (March 23).

Bank of Russia governor Elvira Nabiullina ordered Russian exporters to use 80% of their foreign exchange earnings to buy rubles on February 28. That move was a response to strict financial sanctions imposed following Putin’s decision to invade Ukraine.

The sanctioning countries froze the large proportion of Russian central bank assets that were held in their countries. Nabiullina said that the central bank would no longer use its own reserves to support the ruble.

An unconfirmed report today said she had considered resigning after the invasion of Ukraine and the resulting sanctions, but was told to remain by Putin.

Putin’s announcement today indicates that the Russian authorities’ attempts to support the ruble may not be working as well as his government hoped. The ruble fell drastically after the initial round of sanctions but recovered somewhat in recent days.

The Russian currency briefly hit 150 to the dollar on March 7, but has been trading at around 105–110 since March 16.

Some of the countries that imposed sanctions have continued to imports large quantities of products from Russia, including natural gas and oil. European Union countries have had a fierce debate over whether Germany and other major importers should reduce or cut their purchases.

Several EU countries, including Poland, have echoed the Ukrainian government’s calls for Germany to sever its long-term contracts to purchase Russian gas. German chancellor Olaf Scholz and other government figures have rejected this course, saying that to do so immediately would cause a European recession.

Russia’s second largest bank, Gazprombank, is the financial arm of the Russian state-owned natural gas monopoly and is the counterparty on export-import deals. It has so far remained outside financial sanctions.

Several market observers said it was not clear how far Russia had been able to access the payments made to it for recent exports.

Putin today attacked “so-called unfriendly countries”, saying “the collective west has killed all trust in their currencies”. He said Russia would demand payment in rubles from them “in the shortest possible time”, government news agency Interfax stated.

Last week, Putin threatened to pay Russian sovereign bond coupons in rubles, but in the event the authorities did not follow this course. Instead, the Russian government sent payment instructions to its normal bank in the US, Citibank, which apparently paid out in dollars.

Resignation rumour

An unconfirmed report by Bloomberg said that Nabiullina had considered resigning after the imposition of sanctions, but was dissuaded by Putin, who nominated her for a third term as central bank governor several days ago.

Nabiullina’s second term was due to end in June but she will almost certainly be confirmed in office by Russia’s parliament. The Bloomberg report said that central bank staff members had previously prepared for sanctions including a ban on Russian banks using the Swift system.

But it said they were stunned by the freezing of central bank assets, which they had regarded as extremely unlikely. Many central bank officials had resigned since the invasion, Bloomberg said. It added, however, that employees of commercial banks had flooded the Bank of Russia with job applications.

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