(The following is an updated version of a Thursday report,
adding Friday's finance ministry and central bank announcements)
* Rouble to feel extra pressure as cbank returns to market
* Cbank was reluctant to resume interventions - sources
* Plan to rebuild fiscal buffers finds support in Kremlin
* Rouble seen 10 pct weaker at $55 oil under new budget rule
* GRAPHIC - Rouble and oil prices tmsnrt.rs/2kg8djk
By Darya Korsunskaya and Andrey Ostroukh
MOSCOW, Feb 3 Russia will resume buying dollars
next week for the first time since a brief burst in 2015, but
sources told Reuters the purchases will go ahead only after a
reluctant central bank won assurances it could distance itself
from the operations.
People involved in discussions of the planned purchases
said the bank had feared investors would regard them as currency
interventions designed to weaken the rouble, rather than the
stated intention of replenishing Russia's fiscal reserves
depleted by low oil prices and international sanctions.
The central bank, which has a policy of letting the rouble
float freely, insists it is not intervening in the foreign
exchange market to influence the currency's rate. Instead, it
said last month that it would merely buy the dollars on behalf
of the finance ministry, which came up with the plan following a
modest uptick in oil prices over the past year.
Nevertheless, the purchases may still create a dilemma for
the central bank by putting downward pressure on the rouble
after a period of relative calm. Already, the currency suffered
its biggest one-day drop so far this year on Jan. 26, when the
operations were announced.
The rouble was one of the best-performing currencies
globally in 2016. However, the government would stand to benefit
from a weaker currency as it means oil revenues earned in
dollars would translate into more roubles, allowing it to boost
spending. That would be especially helpful in the run-up to
elections next year, when President Vladimir Putin is likely to
seek a new term.
Describing discussions before the announcement between the
bank, finance ministry and Kremlin, three sources said the
central bank had had misgivings that buying dollars would hurt
its reputation on financial markets.
Governor Elvira Nabiullina had worried she would have to
justify the new round of interventions, one former government
official familiar with the matter told Reuters.
"But the finance ministry offered a life line by taking
responsibility. Now she won't have to answer uneasy questions,"
said the source. "She will say it was the finance ministry's
decision, it's their money, and we are just acting as an
The finance ministry announced on Friday that the central
bank would buy the equivalent of 6.3 billion roubles ($106
million at current market prices) a day on the Moscow Exchange
this month to replenish the country's fiscal reserves.
The announcement covers purchases to be made between Feb. 7
and March 6.
FACTBOX - Winners and losers from FX purchases
The central bank said it saw less room for interest rate
cuts following the announcement of dollar purchases, while
keeping the key rate unchanged at 10 percent on Friday.
Many investors credit the bank with steering Russia through
an economic crisis since 2014, and view it as a bastion of sober
policy-making in an otherwise hard-to-predict Russian system.
A spokeswoman for Prime Minister Dmitry Medvedev said the
government has no "levers of pressure" on the central bank,
while Kremlin spokesman Dmitry Peskov said Putin gave no orders
to the bank to start dollar buying.
The bank last bought dollars on the domestic market in
mid-2015 in a short-lived attempt to replenish its reserves,
halting them to ease downward pressure on the rouble.
Russia's economy was badly hurt by the combined effects of
plunging oil prices in 2014-2015 and Western sanctions imposed
over the Ukraine crisis. Its Reserve Fund shrank to just $16
billion by early February from nearly $90 billion before
Moscow's annexation of Crimea in 2014 as the country spent the
money to plug holes in the oil-dependent budget.
The International Monetary Fund has welcomed the finance
ministry plan as it should help to rebuild reserves, improving
predictability of fiscal policy. However, it said the budget
needed a "more comprehensive oil framework".
Despite the central bank's efforts to keep the purchases at
arms' length, it may struggle to dispel the perception of
"This is indeed a step away from a free float. They are
doing the right thing, presenting this as an (action by) the
finance ministry, not the central bank," a person close to the
decision-making process in the Kremlin said.
The purchases stem from a budget rule adopted in January.
Under this, extra revenues from oil exports would be directed
towards rebuilding the Reserve Fund. That means selling roubles
on the currency market to buy foreign exchange.
While from a fiscal point of view that makes sense,
according to several economists, it will have a knock-on effect
on monetary policy. According to finance ministry projections,
the currency transactions required to implement the budget rule
will push the rouble down.
A weaker rouble could increase inflation and thus delay an
economic recovery by prompting the central bank to postpone
interest rate cuts.
The amount of interventions will vary, based on average oil
prices in the previous month. The finance ministry will disclose
the amount of foreign currency it wants the central bank to buy
for it at the beginning of every month.
The move to resume dollar purchases came after Finance
Minister Anton Siluanov and Trade Minister Denis Manturov said
Russia was not interested in having a strong rouble.
Even though the finance ministry has since presented the
budget rule as a measure to limit the economy's dependence on
oil prices, its appearance shortly after the rouble had firmed
to its strongest since July 2015 fuelled speculation that its
real goal was to restrain the currency.
"Both the timing and ad hoc way in which this measure has
been implemented will lead many market participants to interpret
it more as an attempt at FX interventions," Goldman Sachs said
in a recent research note.
With Russia unable to diversify its economy quickly from
relying on commodity exports, the budget rule will artificially
limit the upside for the rouble as Urals crude URL-E remains
well above the $40 per barrel price factored into this year's
If Urals averages $55 - roughly its current level - the
budget rule envisages keeping the rouble about 10 percent
weaker: the finance ministry sees the dollar at 64.9 roubles
under the rule versus 58.05 without the rule. The rouble was
around 59.5 on Friday.
Recent gains in the rouble are harmful to influential
exporters who want to receive more roubles for the goods they
sell in dollars. On the flip side, a stronger currency is better
for households and companies operating on the local market as it
helps to keep inflation down and makes imports more affordable.
Critics say the manner in which the plans for dollar
purchases has been executed calls into question the credibility
of Russia's monetary and fiscal authorities.
"No trust in the rouble will ever emerge if the government
devalues the rouble every two years. Manipulations with the
exchange rate and monetary policy should not be aimed at solving
budget issues," said Pyotr Milovanov, a currency trader at
(Additional reporting by Alexander Winning in Moscow and
Gwladys Fouche in Oslo; editing by David Stamp)