Finance Ministry Proposes Budget Rule Tweak, Looks To Weaken Rouble

Russian Ministry of Finance has proposed to change the nation's budget (or fiscal) rule, Vedomosti reports, and might use some of the surplus revenue to fund FX interventions.

• The rule that channels extra gas and oil revenue into Russia's rainy day fund was suspended in response to the pandemic of COVID-19. The Finance Ministry was planning to reinstate it this year, but decided otherwise as Western governments rolled out sanctions over Russia's war on Ukraine.
• The plan to tweak regulations was telegraphed by President Putin, who gave the government until the end of July to draft new rules, as Russia seeks ways to prepare its economy for living under the tight sanctions regime.
• Vedomosti reports that the Finance Ministry proposes to "focus on the cut-off price of $60/bbl when calculating basic oil and gas revenues and fix the production volume at the level of 9.5 million barrels per day."
• The newspaper flags proposals to use some of the surplus revenue from energy commodity sales to fund FX interventions and stimulate rouble depreciation. Interventions would be made "only in the currencies of friendly countries."
• Two analysts told Vedomosti that this could push USD/RUB higher by 10-20 figures from its current levels, but there are question marks surrounding future oil price dynamics and future sanctions pressure.