Artificially convertible currency
After the start of the war in Ukraine, the official dollar and euro rates in Russia broke through historical highs, and then the ruble, on the contrary, suddenly strengthened to the levels of 2017 (the dollar fell to 56.3 rubles, the euro to 53.86 rubles, which is comparable to October 2014) . At the start of trading on July 19, the dollar fell below 56 rubles. It is impossible to call such a market rate, because the demand for the currency is artificially limited by the state.
So, in February, the Central Bank first stopped foreign exchange trading on the Moscow Exchange for several weeks, and in March introduced a ban on withdrawing money from foreign currency accounts over $10,000 (the rest can only be cashed out in rubles at the current low rate). In parallel, the largest Russian banks came under sanctions and were disconnected from the SWIFT system, and it became almost impossible for Russians to open new foreign accounts.
In fact, in a matter of days, almost all dollars and euros were withdrawn from circulation in the country. On April 18, the Central Bank lifted the ban on the sale of dollars, but it did not affect all banks. At the same time, it became possible to sell only the currency that arrived at the cash desk after March 9. As a result, by the evening of the same day, most Sberbank branches ran out of dollars. At the same time, old banknotes were often issued there, with which, according to experienced travelers, difficulties arise when exchanging in other countries.
Many other banks did not issue currency at all. For example, Raiffeisenbank responded as follows: “The order of the Bank of Russia gives the right to sell cash currency, but does not oblige banks to do so. Now we only carry out currency exchange operations for rubles. Alfa-Bank did not sell cash in most branches either – they only allowed to cash out dollars bought before March 9 from foreign currency accounts.
Now you can buy currency in Moscow exchange offices – little by little and not everywhere, but the rate will differ greatly from the official one, by at least 10-15 rubles.
It is easy to buy currency on the stock exchange – and at a favorable rate, only when it will be possible to use it is not very clear, explains independent financial analyst Vladimir Levchenko: “You cannot withdraw them, you cannot buy any asset with them, for example, Eurobonds or foreign shares, you will not be able to withdraw them practically anywhere.” This did not prevent Russians from buying currencies in banks for 400 billion rubles in April-June – a record for the last four years, the Central Bank claims in the July report “Overview of Financial Market Risks”. From the same report, it follows that Russians keep money mainly in accounts, because it is impossible to withdraw the currency bought since March.
The second factor that helped to artificially strengthen the ruble, creating demand for it, was the forced buyout of foreign exchange earnings of exporting companies: the Ministry of Finance ordered the sale of 80% of all foreign exchange earnings. In May, this figure was lowered to 50%, and in July, Vladimir Putin suddenly canceled the norm. Now the government commission for foreign investment control, headed by Prime Minister Mikhail Mishustin, will determine the size of the share sold on the market. However, it has not yet set any new limits.
Background: How the state manipulated the course in the 90s and regulated the sphere in the 2000s
For the first time, the scheme of forced redemption of foreign exchange earnings was used by Mikhail Gorbachev in 1990 "to pay off the external debt of the USSR", however, then only 40% had to be sold, while the state officially announced the existence of an additional, market dollar rate. And if the "state" rate was 1.8 rubles per dollar, then the "market" rate instantly reached 30 rubles.
The same system was adopted by independent Russia under Boris Yeltsin. As Kommersant wrote, from January 1, 1992, exporters were obliged to sell 40% of their proceeds to the republican currency fund (to finance state imports), and another 10% to sell to the Central Bank (to stabilize the market exchange rate of the ruble). The sale was carried out at a new commercial rate – already 55 rubles per dollar, but it was soon canceled, and only the market rate remained in use – at 130 rubles per dollar. In 2000, the state still needed dollars to pay off the same external debts, so enterprises had to sell foreign exchange earnings – but already 75%.
But even in the 90s, people could freely buy currency in private exchangers. A set of rules governing currency exchange began to appear after the 1998 default. Some of them were gradually canceled, but some remained and became tougher.
“Already in 2004, cash transactions were allowed only for credit institutions, each exchange office required permission from the territorial administration of the Central Bank. All these requirements were constantly violated and constantly tightened. Since October 2010, exchange offices as such have been banned – currency exchange is allowed only in branches and additional offices of banks. Since May 2019, banks have already been banned from posting street displays with exchange rates,” economist Valery Kizilov describes the regulation of exchangers.
Since it is impossible to withdraw the currency bought cheaply on the stock exchange or directly from the bank, money began to accumulate in the foreign currency accounts of the country's citizens. From the beginning of the summer, banks decided to introduce commissions for servicing such accounts. By July 20, the commissions had already been introduced by Raiffeisenbank, Rosbank, Tinkoff, Gazprombank and Uralsib. For example, Tinkoff introduced a 12% annual fee for servicing foreign currency accounts (provided that the client's balance is more than 10,000 USD, EUR, GBP or CHF). They stopped opening savings accounts and deposits in dollars and euros, as Izvestia wrote , at PSB, Rosbank, Otkritie, Tinkoff, and since July, at VTB. According to the TASS certificate, the introduction of commissions on existing foreign currency accounts is illegal.
How to change currency. Method One: Crypto Federation Tower and Crypto Hawala
As always, the gray market came to the rescue: people need to change money somehow. The largest crypto exchangers based in Moscow City responded most quickly to the situation. They have previously dealt with shadow exchanges of rubles and dollars for cryptocurrencies and its withdrawal abroad. Now currency exchange has been added to their list of services. And in the form of cash for cash. And after the blocking of almost all foreign social networks, Telegram became the main advertising and trading platform.
For example, the exchanger CentralExchange bought out a channel with almost a million subscribers (most likely not real, since by July the number of subscribers had already fallen below 400 thousand, and the channel was resold to "the world's first dollar billionaire video blogger" Igor Rybakov) to offer currency exchange services in the Federation Tower. Until March 26, the channel published only news of crypto-exchanges, and then it was renamed into the “Central Exchanger”. The minimum exchange amount from April 4 is $25,000, but at an exchange rate close to the Central Bank.
“You give money at one cash desk – on the other floor you receive it in the same way at the cash desk,” the channel support operator promises. He claims that you can exchange 4 million rubles for a cash dollar with your own calculating machine. He also offers to cash out money from the Tinkoff dollar account – for a commission of 18%.
Literally in the first month of the war, according to Glassnode, about 800 thousand new bitcoin wallets were registered, but the average transaction on such wallets remained small – according to Binance, $580 per ruble/bitcoin transaction.
Exchangers withdraw money abroad through cryptocurrency and with the help of the Islamic hawala scheme – when cash in one part of the world is given to an intermediary, and after a few hours a person in another part of the world can receive it. Hawala existed in the Middle East many centuries before the advent of modern banking systems and continues to exist to this day: because of convenience and trust, as well as for transactions with money obtained illegally. Now there are several channels and chats in Telegram that use this Islamic concept, and mainly people with Slavic names and surnames participate in transactions and money transfers.
In Iran, the system became especially popular after Western countries restricted business access to financial systems. When Iranian banks started being cut off from SWIFT a decade ago because of Western dissatisfaction with Iran's nuclear policy, companies had difficulty settling accounts with Iran. By 2019, almost all Iranian banks were cut off from SWIFT. In addition, the official exchange rate of the rial and the real market exchange rate differed significantly.
Settlements are carried out either through shim companies registered in free trade zones for companies that are formally not related to Iranians in any way, or, even for an amount of hundreds of thousands of dollars, the hawala system is used. The commission for transferring money to or from Iran is about 1-1.5%. The system is used not only in private settlements – through it, Iranian importers pay for the delivered goods to the exporter's account in the bank of the United Arab Emirates or Turkey.
Exactly the same scheme has been used in Russia for many years by suppliers of fresh imported products and Chinese goods. Exchangers operate in the largest Moscow markets – Sadovod, Food City. Similar schemes began to be created for transfers of individuals. Through cold crypto wallets, money is transferred to any country in the world and cashed out in partner exchangers. For the transaction take from 4%.
Background: Chinese Markets
Even before the start of the war, large food and clothing markets in Moscow (and probably other cities) were also involved in the exchange of currency and sending it across the borders. Back in 2018, Yury Polupanov, director of the Central Bank’s Department of Financial Monitoring and Currency Control, called them “pioneers and leaders in offering to buy cryptocurrencies.” Most of the market revenue – including from the sale of goods imported under gray or outright illegal schemes – was transferred directly to China in the form of cryptocurrency.
Before the COVID-19 pandemic, market traders were withdrawing $10-30 million in cryptocurrencies from Russia daily. This is at least 30% of the turnover of crypto exchangers in Russia.
As Novaya Gazeta wrote , transactions took place by appointment at the Druzhba Hotel right behind the Moskva shopping center. “You had to come there with a suitcase of cash rubles or dollars, the Chinese “performed some manipulations on the computer, bought bitcoins, instantly transferred them to Hong Kong, and you receive documents for goods that can be delivered anywhere in Russia,” the source said. editions.
Now sellers in these markets are facing problems: if earlier they could pay for goods in rubles, now all Chinese partners want to be paid in foreign currency.
How to change currency. Method Two: Back to the 90s
The current situation reminds people of the 90s, when in the countries of the former USSR it was far from always possible to find currency in banks and exchangers, the exchange rate was constantly changing, and private traders were engaged in the exchange at markets and train stations. They offered their own exchange rate for "hard currency" – a freely convertible currency.
In the 21st century, this relatively free market moved to Telegram. During the first weeks of the war, a huge number of chat rooms appeared there, where you can buy and sell different currencies – both crypto and cash. Even those who had never really heard about cryptocurrencies began to withdraw money abroad through cryptocurrency. By the summer, the number of active cash exchange chats had reached several dozen, and special bots for money exchange also appeared, which automatically calculates the amount and sends a courier with cash to the address specified by the client.
In mid-March, one of the sellers of cash currency offered The Insider correspondent to buy euros for 2 million rubles at the rate of 137 rubles in some underground exchanger in Zelenograd. According to his description, the exchanger is located in the same building as the pawnshop. The exchange was promised to be carried out in a closed booth, with a real cash register, a calculating machine and a banknote detector. At the same time, he assured that the police would not come at the time of the calculations. At the same time, other sellers offered to sell cash dollars at 126 rubles in the amount of 3 million rubles. The checks were supposed to take place at the bank branch, but then the seller moved the meeting to Moscow City and asked to come early in the morning.
There are also chats for "private exchange" of currencies, in which people write their offers to sell or buy currencies. The largest chat rooms consist of tens of thousands of people. There, participants from different cities of Russia leave their offers for the sale or purchase of currencies.
The rate at which people are willing to buy and sell dollars or euros is constantly changing and often does not coincide with the Forex rate. Most of the ads are written by ordinary people – some of them needed rubles and they sell the currency from their savings, while others are trying to save their ruble income from inflation by buying dollars and euros.
For example, several people putting up for sale at $500 each answered a question from The Insider correspondent that they urgently needed rubles, and the exchange rates in banks are very unprofitable. Another man, who was urgently buying several thousand dollars on the black market, explained that he needed to buy equipment from Chinese suppliers. If earlier he could easily pay in rubles, then in March his partners began to demand payment only in euros.
According to The Insider's calculations, until the end of March, there were approximately equal numbers of ads for the sale and purchase of cash. As early as May, only proposals for the sale of dollars and euros appeared in chats, and there were fewer public bids for purchases. Now in chats there are mainly those who exchange amounts of money from several tens of thousands of dollars, but there are also sellers who are ready to exchange smaller amounts from 500 dollars. In addition, offers began to appear on such sites for the purchase and sale of the Ukrainian hryvnia in large cities of Russia, including by bank transfer.
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