[caption id="attachment_119376" align="alignright" width="178"] The Central Bank of Russia on Neglinnaya Street in Moscow. (RIA Novosti/Vitaliy Belousov)[/caption]
The ruble slid to a new record low of 39.71 against the dollar Tuesday. The Russian Central Bank has been quick to quash fears it would re-introduce capital controls to limit the amount of foreign currency purchases, or even moved outside the country.
�Bank of Russia is not considering the introduction of any restrictions on cross-border capital flows as it was reported in some publications in the mass-media,��the bank said in a�statement�on Tuesday evening.

The bank�s statement followed a�report�by Bloomberg News citing anonymous officials that the bank is considering imposing capital controls, as the ruble hit new historic lows.

The Central Bank said it would intervene once the euro-dollar currency basket against the ruble reached a level of 44.4, which it reached on Tuesday before quickly retreating.

Capital controls are a monetary tool by Russia�s key lender to restrict money flowing overseas, which in Russia is projected to reach $100 billion in 2014, nearly on par with the $120 billion that fled in 2008 when the financial crisis hit. In 2007 Russia had a positive net capital inflow.

Andrey Kostin, Chairman and CEO of VTB, doesn�t believe that Russia will impose capital controls just yet, talking to CNBC at VTB�s annual investment forum �Russia Calling!�.

�The basic issue now is whether the Russian leadership, under the circumstances, will switch to the model of a mobilization economy, and introduce the old mechanism of currency control, or they will stay on the principle of their open market economy. I think that is the big question that will be asked tomorrow,�Kostin said.

Russia repealed capital controls in 2006, however last week Central Bank Chairwoman Elvira Nabiullina said that Moscow would consider��non-standard��mechanisms to ensure economic stability.

Capital controls aren�t the only monetary tool the Central Bank could consider. If the ruble continues to weaken, it may decide to re-start currency interventions, pumping in billions of dollars to artificially prop up the currency. This would be a policy reversal for the bank, which has recently loosened its monetary controls in order to make the overvalued ruble free floating by 2015.

�Never say never, but not at this stage, definitely,��the VTB CEO said when asked if capital controls are on the horizon.

By RT

 

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