Russia stems flow of dollars

IN A DESPERATE attempt to stem capital flight, Russia will introduce a series of tight controls over foreign-currency payments for imports and exports, the Central Bank announced last night.

Government officials have said that more than US$25bn has been smuggled out of Russia since the 1991 Soviet collapse.

Between US$3.5bn and US$4.5bn were taken out of the country legally between May and mid-August this year.

As the economic crisis has unfolded, the Central Bank has sought to ensure that foreign currency comes into Russia and stays, and has recently revived a defunct rule requiring Russian exporters to bring half their export earnings to Russia and convert them into roubles.

The new regulations, which take effect tomorrow, will require Russian exporters to either secure a pre-payment in hard currency to their accounts at an authorized Russian bank, or open an irrevocable letter of credit at such a bank.

The foreign counterpart will be allowed to make payments only through authorised banks that guarantee the compliance of Russia's currency controls, the Central Bank said.

Russian-based importers will have to prove that the goods will be sold in Russia in order to be allowed to pay out hard currency.