Putin sent Russians hunting wildly for dollars on the black market

(Bloomberg) – As the ruble’s official exchange rate shares its value on the street, the dollar is becoming harder to find.

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For Boris, a Moscow-based doctor, the search became so desperate that he thought of a high-tech, and seemingly impossible, black-market plan that a friend was pushing.

After interacting with a bot through the Messenger app, his acquaintance electronically transferred rubles to get a barcode that he scanned to access a secure storage box at the Moscow Mall.

The 1,000 euros ($ 1,040) he ordered was sitting inside.

“Banks either have no foreign exchange, or, if they do, they sell it at a bad rate,” said Boris, 35, who requested that his title not be used because of the sensitivity of the issue. Still, “you have to really trust the system to do it. I won’t risk it,” he said.

Vladimir Putin’s war against Ukraine has put the economy on track for the sharpest contraction in decades. But since the onset of the attack, the Russian currency has risen nearly 25% against the US dollar, making it the undisputed best performer in the world.

While this has allowed Putin to boast that Western sanctions “blitzkrieg” have failed, ordinary Russians cannot take advantage of the currency’s strength. Oil flows and capital controls have distorted government rates, and the ruble exchange point and the black market are about 20% weaker – reminiscent of many Russians of their Soviet predecessors.

“It’s like trying to show that the Soviet Union is beating America. In 1982, someone shook a copy of the Izvestia newspaper and said, ‘Look, the dollar is worth only 64 kopecks!'” Said Moscow-based professor Sergei Khestanov. Adviser to the CEO of Finance and Banking and Otcriti Brokerage. “I would agree – if anyone could actually buy a dollar for 64 kopecks.”

Strict rules

Under recent central bank rules, lenders can only sell dollars and euros received from April 9. Individuals can withdraw hard currency, but only from accounts opened before March 9 and not equivalent to 10,000 before September. There is also a cash limit of $ 10,000 when traveling abroad.

In the aftermath of the illicit money changers operating in the late Soviet era, middlemen working in collusion with bank employees lured buyers with official rates posted on currency exchanges.

As in the past, according to Boris, there is always the danger of leaving with counterfeit notes He eventually chose the mediator and paid 15% more than the official rate to buy $ 2,000 for his ex-wife and children. They needed cash on vacation in Turkey as the ban has stopped Russian-issued credit cards from working abroad.

On Monday, banks were selling an average of 20% more dollars than the ruble quoted on the Moscow exchange, according to a survey of about 70 Moscow banks and exchange points on the financial websites RBC and Banki.ru. The black-market rate, shown on the Currency Exchange Channel in the messenger app, ranged from 73 rubles to 75 rubles in Moscow, while the Moscow exchange closed at 63.4 dollars per ruble on Monday.

In a country like Zimbabwe it may be a long way from the huge gap between official and black market rates, but Russia’s disparity reflects the reality of an economy that has never been isolated in post-Soviet history.

Sanctions on Russia’s isolation from the global banking system and emergency capital controls at home are halting imports and making large-scale capital flight impossible. At the same time, international sanctions have been carefully crafted to allow countries to continue purchasing Russian oil, gas and other goods, with billions of dollars flowing into the Kremlin’s coffers each week.

Read more: Russia jumps to current account surplus record despite sanctions

Defending the United States’ one-sided approach, Secretary of State Anthony Blinken dismissed the Rubel rally in early April as “unsustainable.” The currency has risen 30% since Blinken spoke, but Tatha Ghose at Commerzbank AG agrees.

“There are no more forward elements in the exchange rate because sanctions and capital controls hinder the flow of meaningful capital,” Ghosh wrote in a report. The ruble is replaced by “the current daily demand and supply for the business of items that can still be exported and imported.”

Even the Bank of Russia acknowledged in its latest financial report that sanctions have largely turned the rate into a blunt expression of the country’s trade balance.

With European governments imposing sanctions on oil and gas in late 2022, Ghosh predicts that the ruble will depreciate by 10% by the end of the year and by another 20% by the end of 2023.

To be sure, some ruble weakness will be welcomed by the Ministry of Finance.

The dollar is depreciating against Russia’s main crude oil, the Urals, and the rise in the currency means the government is collecting less rubles per barrel, hampering its budget revenue targets.

Christopher Granville and Medina Krustaleva of TS Lombard wrote in a note that Russia would have “virtually no cushions for the economic recession and the financial pressures of Ukraine’s protracted war.”

On her way to the dollar in Moscow, Sofia, 22, a student, was able to buy তৃতীয় 550 at an official exchange point on her third attempt.

She is receiving cash to carry to her boyfriend, whom she sent to Prague amid constant speculation that Putin will announce a national call-up as soon as the war begins. His advice: To avoid frustration, travel early and contact the bank in advance.

“The exchange rate was bad, much higher than the official rate,” he said. “But at least they are not taking 30% commission like in February.”

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