Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

RUSSIAN FEDERATION

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of June 30, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: June 1, 1996.
Exchange Arrangement
CurrencyThe currency of the Russian Federation is the Russian ruble.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe Central Bank of the Russian Federation (CBR) sets and announces the official exchange rates against the ruble daily. These rates are based on ruble quotes against the dollar on the internal foreign exchange market and on quotes of other foreign currencies against the dollar on the global exchange market. The CBR intervenes in both the interbank currency exchanges and the over-the-counter interbank market to maintain a stable ruble exchange rate. The dollar is the intervention currency.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward transactions are conducted by authorized banks. Trading in futures contracts is conducted on the Moscow Interbank Currency Exchange and the St. Petersburg Currency Exchange.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsSettlements between residents in foreign exchange are regulated by law.
Payments arrangements
Bilateral payments arrangements
OperativeThere are agreements with the CIS countries, Bulgaria, Mongolia, and Vietnam.
InoperativeAgreements with the Islamic Republic of Afghanistan, Cuba, Egypt, India, and the Syrian Arab Republic are inoperative.
Clearing agreementsYes.
Administration of controlThe CBR enforces foreign exchange control regulations, supervises and monitors transactions of authorized banks and the authorized exchanges, and regulates banks’ open foreign exchange positions. In addition to the CBR, the federal executive authorities (authorized by the government and within the limits of their jurisdiction) have the power to control foreign exchange transactions, with the exception of transactions by credit institutions and currency exchanges.
International security restrictions
In accordance with UN sanctionsCertain commercial and financial transactions with Iraq are prohibited.
Payments arrears
OfficialYes.
PrivateYes.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeThe purchase and sale of precious metals by juridical persons must be reported to the Federal Financial Monitoring Service (FFMS) (previously, the Financial Monitoring Committee of the Russian Federation—FMC).
Controls on external tradeResidents require a license from the Ministry of Economic Development and Trade (MEDT) to export gold. Banks also require a license from the CBR to conduct transactions in precious metals in order to export gold.
Controls on exports and imports of banknotesForeign and domestic banknotes may be exported and imported by residents and nonresidents in accordance with procedures established by law.
On exports
Foreign currencyResident and nonresident natural persons may not export foreign banknotes exceeding the equivalent of $10,000, and exports exceeding $3,000 require a customs declaration. Amounts exceeding the equivalent of $10,000 may be exported only if previously imported, as indicated on the customs declaration.
On imports
Foreign currencyResidents and nonresidents may transfer and import any amount of foreign currency into the Russian Federation, provided that customs regulations are observed.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResidents may open foreign exchange accounts with authorized banks without restriction.
Effective June 7, 2004, residents are required to open the following special accounts with authorized banks for certain foreign exchange transactions with nonresidents: (1) F accounts, which are used for foreign currency loans (with a maturity of less than three years) and for purchases from and sales to nonresidents by resident individuals of foreign currency securities; (2) R1 accounts, which are used by resident legal persons for settlements and transfers of proceeds of foreign exchange loans and credits from nonresidents, for the receipt of proceeds from primary placements to nonresidents of shares and bonds defined as external securities, and for the receipt of proceeds from sales of external securities that are not recorded on the special deposit accounts of nonresidents; and (3) R2 accounts, which are used by resident legal persons for settlements and transfers related to the granting of foreign exchange loans and credits to nonresidents, for the purchase of external securities from nonresidents, and for the receipt of the proceeds from sales of external securities that are recorded on the deposit accounts to nonresidents.
Credit and loans of more than three years’ maturity may be made without the use of special accounts, as may securities transactions between resident individuals and nonresidents of up to $150,000 a year. Previously, a CBR permit was required for all deposits of proceeds from capital transactions except for (1) credits of foreign exchange received from a nonresident as payment for shares in the authorized capital of a resident to a resident foreign currency account; (2) credits of foreign exchange received from a nonresident under a participatory contract to a resident foreign currency account; and (3) repayments of funds previously received from a nonresident as payment for shares in the authorized capital of a resident juridical person under a participatory contract effected in rubles to the nonresident’s account.
Effective August 1, 2004, a reserve requirement of 3% for 365 calendar days was established on R1 accounts and a reserve requirement of 50% for 15 calendar days was established on R2 accounts.
Held abroadEffective June 18, 2005, residents may open foreign currency–denominated accounts abroad, with banks in OECD and FATF member countries, provided they notify the tax authorities at their place of record. Previously, effective June 18, 2004, approval was not required for resident natural persons to open accounts with banks in OECD and FATF member countries, provided that the funds credited to these accounts were not used for commercial purposes.
Resident authorized banks licensed to engage in ruble and foreign exchange transactions may maintain correspondent accounts with nonresident banks. They may also open accounts in nonresident banks to service the activities of their representative offices abroad, subject to notification requirements. If regulations of parent authorized banks permit, their foreign branches may freely maintain accounts with nonresident banks. Prior to June 18, 2004, resident juridical persons (except for budgetary organizations) could open foreign currency accounts in nonresident banks to service the activities of their representative offices abroad and to service their international construction agreements.
Approval requiredYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedAccounts may be opened without restriction.
Domestic currency accountsEffective June 18, 2004, nonresidents may open and maintain five types of accounts: (1) S accounts for transactions by nonresidents with residents relating to ruble-denominated federal government securities; (2) A accounts for transactions by nonresidents with residents relating to ruble-denominated stocks or shares in mutual funds; (3) O accounts for transactions by nonresidents with residents relating to internal securities issued by residents, except federal government securities; (4) V1 accounts for ruble-denominated loans from residents to nonresidents, or for primary placement of stocks, bonds, or promissory notes classified as internal securities; (5) V2 accounts for ruble-denominated loans to residents and purchases or sales by nonresidents of internal securities (except promissory notes) that are not publicly issued. All nonresident non-cash transactions with a maturity of less than three years must be channeled through one of these types of accounts.
Previously, nonresident juridical persons could open and maintain six types of accounts: (1) K accounts, whose balances could be converted into foreign currency; (2) N accounts, whose balances could be converted into foreign currency not less than 365 days after presentation of a currency purchase order to an authorized bank; (3) F accounts, which could be freely opened by nonresident natural persons and whose balances could be freely converted into foreign currency; and (4) three categories of S accounts, which were (i) conversion accounts, whose balances were convertible into foreign currency; (ii) investment accounts, whose balances could not be converted into foreign currency; and (iii) project accounts, whose resources were used for domestic investments, which require CBR permission. Funds credited to project accounts could be transferred freely to S (conversion) accounts and converted into foreign currency. The time requirement for holding funds from S accounts in transit accounts was 30 days and that for holding securities from S accounts was 60 days. K, N, and F accounts could be freely opened at authorized banks. S accounts could be freely opened only at authorized banks that have special approval of the CBR to maintain these accounts. There were no restrictions on the purchase of foreign currency with balances in K, F, or S (conversion) accounts. On June 18, 2004, K, N, and S were abolished and the remaining balances were required to be transferred. Effective July 1, 2004, nonresidents are allowed to transfer freely funds from K, F, and S accounts abroad or to other domestic accounts in their name, subject to reserve requirements.
Effective August 1, 2004, the following reserve requirements apply: 20% for 365 calendar days for S accounts; 3% for 365 calendar days for O accounts; 50% for 15 calendar days for V1 accounts; and 3% for 365 calendar days for V2 accounts.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsEffective June 18, 2004, residents may make advance payments for imports for a period up to 180 days (previously, up to 90 days) without restriction, if the contract is secured by an irrevocable LC, a bank guarantee, a property insurance agreement, or a bill backed by a nonresident bank. Other advance payments are subject to provisioning requirements, which have not been put into effect yet.
Documentation requirements for release of foreign exchange for importsEffective April 10, 2004, MOF approval is no longer required for advance payments for imports exceeding the equivalent of $10,000.
Import licenses and other nontariff measuresPrivate imports of ethyl alcohol are prohibited. Licenses are required for imports of various alcoholic products, as well as dual-use items, military equipment, medicine, industrial waste, and ozone-depleting substances.
Negative listYes.
Import taxes and/or tariffsMost customs duties range from 5% to 15%, but duties of 25%–30% are levied on certain sensitive goods. The following products are exempt from duties: insulin and some other pharmaceuticals, printed materials, cotton and cotton wastes, some animal species, raw diamonds, wheelchairs, works of art, collectibles, and antiques. Imports of goods on the approved list from developing countries are subject to a customs duty that is 75% of the applicable rate.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsAll proceeds from exports received by residents must be credited in full to their foreign exchange accounts opened with authorized banks. Foreign exchange proceeds may remain in the accounts of residents or third parties with banks outside the Russian Federation if they are received (1) from the export of goods, work, services, or intellectual property up to the amount necessary for execution of the obligations of residents under credit agreements with nonresidents who are agents of governments of OECD or FATF member states for a period exceeding two years; (2) for construction costs abroad covered by nonresidents; (3) for exhibitions abroad covered by nonresidents; (4) for the netting of transportation; and (5) fishing costs incurred abroad.
Surrender requirementsEffective December 27, 2004, a surrender requirement of 10% (previously, 25%) applies on proceeds from exports of goods, services, and intellectual property of residents. Residents must surrender the 10% portion of their foreign exchange proceeds from exports of goods within seven days on the interbank exchange market.
The following are exempt from the surrender requirement: (1) receipts from transactions of the government, authorized federal authorities, the CBR, and entities acting on their behalf; (2) receipts by authorized banks from operations and transactions stipulated in the Federal Law on Banks and Banking; (3) proceeds of residents up to the amounts necessary to discharge obligations under credit agreements with nonresident organizations that are agents of foreign governments or with residents of OECD or FATF member countries, for a period of more than two years; and (4) foreign exchange received in transactions involving the transfer of publicly issued external securities or of rights thereto.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExport licensing is limited to goods on a list approved by the government, including military equipment and arms, precious metals and stones, rare animals and plants, dual-use items, ethyl alcohol and alcoholic products, and goods and services exported in accordance with international obligations. Licenses are issued by the MEDT in accordance with established procedures.
With quotasYes.
Export taxesExport taxes are levied on 141 items, and the rate for most of them is 6.5%, with a maximum rate of 50% for nonferrous scrap. A number of goods, including crude oil and petroleum products, are subject to specific duties. Certain goods are subject to combined duties.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPayments for invisible transactions and current transfers by residents are considered current foreign exchange operations under Russian Federation law and are not subject to restrictions.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsReceipts of dividends, interest, and profit by residents from nonresidents abroad must be credited to foreign exchange accounts of residents opened with authorized banks. Residents may freely credit to accounts of nonresident banks foreign exchange proceeds received (1) from exports of services and intellectual property in amounts necessary to discharge obligations under credit agreements with nonresidents from OECD or FATF member countries, for a period exceeding two years; (2) for construction cost abroad covered by nonresidents; (3) for exhibitions abroad covered by nonresidents; (4) for the netting of transportation; and (5) for fishing costs incurred abroad. Authorized banks participating in the authorized capital of nonresident credit institutions must credit dividends due to them to their correspondent accounts, with the exception of the portion used to replenish the authorized capital of the nonresident credit institution.
Surrender requirementsEffective December 27, 2004, 10% (previously, 25%) of proceeds from exports of services and intellectual property are subject to surrender in the internal exchange market.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsEffective June 18, 2004, special accounts are to be used for capital transactions, and effective August 1, 2004, a provisioning requirement applies to certain transactions requiring the use of special accounts.
These requirements do not apply to (1) settlements and transfers of resident legal entities with nonresidents connected with the acquisition and alienation of external securities (or rights certified by external securities) in an amount up to $150,000 a calendar year; or (2) settlements and transfers connected with (i) foreign currency credits and loans with a maturity exceeding three years received by residents from nonresidents, or (ii) ruble currency credits and loans with a maturity exceeding three years granted by nonresidents.
Controls on capital and money market instruments
On capital market securitiesResident juridical persons that are not credit institutions may freely credit to their foreign exchange accounts maintained with authorized banks foreign currency received from nonresidents as shares in their authorized capital.
A CBR permit is required for nonresidents to acquire stocks of resident credit institutions.
Shares or other securities of a participating natureThe associated foreign exchange operations are conducted by residents in compliance with requirements on use of a special account and a provisioning requirement, and by nonresidents only in compliance with the requirement on using a special account.
Purchase locally by nonresidentsEffective June 18, 2004, authorized banks may freely sell securities to nonresidents for foreign currency on their own behalf and on behalf of clients.
Previously, nonresidents could acquire without restriction securities issued by residents with funds in K accounts and the following securities could be acquired by nonresidents with funds in S accounts: (1) stocks of Russian issuers (with the exception of credit institutions) included in the first-level quotation sheet of the Trading Organizers; and (2) stocks of credit institutions where payment was effected in accordance with an order of the CBR.
Sale or issue locally by nonresidentsInitial placement or trading of securities issued by nonresidents on the domestic market is allowed after their prospectus is registered with the Federal Securities Market Commission of the Russian Federation (FKRTsB); effective April 1, 2004, registration must instead be made with the Financial Markets Service (FSFR). These securities must be denominated in rubles.
Effective June 18, 2004, nonresidents may sell to residents securities denominated in rubles for rubles (but settled in rubles or foreign exchange) without restriction. Previously, foreign exchange proceeds of nonresidents from the sale of securities were credited to foreign exchange accounts opened with authorized banks, and ruble receipts from sales of securities issued by residents to K or S accounts.
Purchase abroad by residentsEffective June 18, 2004, resident natural persons may purchase securities abroad using accounts opened abroad. In all other cases, residents must use special accounts opened in domestic banks.
Sale or issue abroad by residentsEffective April 1, 2004, FSFR authorization (previously, authorization from FKRTsB) is required to issue or sell domestic securities abroad. Proceeds must be transferred to current foreign exchange accounts with authorized banks. Effective June 18, 2004, resident natural persons may, in the course of one calendar year, sell or issue foreign and domestic securities abroad in an amount not exceeding the equivalent of $150,000 (previously, $75,000) without prior approval (previously, CBR authorization was required).
Bonds or other debt securitiesThe transaction must be conducted using a special account and observing the provisioning requirement.
Purchase locally by nonresidentsEffective August 1, 2004, the regulations governing shares or other securities of a participating nature apply. Previously, nonresidents could use foreign exchange to purchase from residents debt securities denominated in foreign exchange with a permit from the CBR. Nonresidents could freely purchase domestic securities with funds from K and N accounts.
Sale or issue locally by nonresidentsThe regulations governing shares or other securities of a participating nature apply.
Purchase abroad by residentsThe regulations governing shares or other securities of a participating nature apply.
Sale or issue abroad by residentsEffective April 1, 2004, issues and sales abroad of debt securities by residents require FSFR (previously, FKRTsB) permission. Previously, CBR approval was required for transfers of resources received by residents from the issuance of bonds on international financial markets.
Receipts in foreign currency from the sale abroad of debt securities by residents to nonresidents must be credited to foreign exchange accounts of residents with authorized banks.
On money market instrumentsThe regulations similar to those governing shares or other securities of a participating nature apply.
On collective investment securitiesThe regulations governing shares or other securities of a participating nature apply.
Controls on derivatives and other instrumentsControls apply to all these transactions.
Controls on credit operationsThese transactions must be channeled through the appropriate resident and nonresident accounts.
Financial credits
By residents to nonresidentsEffective August 1, 2004, these transactions must be channeled through the appropriate resident and nonresident accounts. Previously, authorized banks could freely extend financial credits of any maturity to nonresidents in foreign currency and in rubles. Resident juridical persons could freely extend loans in foreign currency to nonresidents for a period of up to 180 days, or for longer periods after notifying the CBR, and resident juridical persons could freely extend loans to nonresidents in rubles using N accounts of nonresidents.
To residents from nonresidentsEffective August 1, 2004, transactions may be conducted freely. Previously, nonresident banks could freely extend credit to authorized banks in foreign currency and nonresidents could freely extend loans and credit to resident juridical persons in foreign currency for up to 180 days, with the exception of loans in foreign currency placed by resident juridical persons on international financial markets and of credits obtained by resident juridical persons from nonresidents in foreign currency without crediting them to their foreign exchange accounts with authorized banks. A CBR permit was required in other cases.
Controls on direct investment
Outward direct investmentDirect investment by authorized banks holding a general license from the CBR in the authorized capital of banks that are not their own subsidiaries and that operate in OECD or FATF countries or in Belarusian banks may be undertaken with CBR notification; investment in other countries requires CBR approval. Direct investment in CIS by resident juridical persons that are not credit institutions may take place freely. Other investments require CBR approval.
Inward direct investmentDirect investments in the authorized capital by nonfinancial enterprises require CBR authorization. For other direct investments, the rules governing shares or other securities of a participating nature apply.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase abroad by residentsEffective June 18, 2004, residents may purchase real estate abroad freely. Previously, purchases required CBR authorization.
Controls on personal capital transactionsThe regulations governing credit operations apply.
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Provisions specific to commercial banks and other credit institutionsSanctions are imposed on authorized banks violating reporting requirements on foreign exchange transactions.
Maintenance of accounts abroadAuthorized banks may open correspondent accounts with banks abroad pursuant to the terms specified in the banking license issued by the CBR. The opening of other types of accounts with banks abroad requires prior authorization from the CBR.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsEffective July 8, 2004, the reserve requirement ratio for ruble liabilities to legal entities and for foreign currency liabilities to legal entities and individuals is 3.5% (previously, 7%). This ratio was reduced two times earlier in the year, to 9% from 10% on April 1, and to 7% from 9% on June 15. Effective August 1, 2004, a provisioning requirement of 2% applies on ruble and foreign currency obligations of credit institutions to nonresident banks. Credit institutions have the right to fulfill a part of the reserve requirement by maintaining the appropriate balances in their correspondent accounts with the CBR. The required reserves for ruble currency obligations is reduced by the amount of ruble cash balances these credit institutions maintain in their cash departments within limits not exceeding 25% of the required reserves for ruble obligations.
Liquid asset requirementsFor the purpose of monitoring liquidity of credit institutions, the CBR has established liquidity ratios, which are determined as the ratio of assets and liabilities of credit institutions, taking into consideration maturities, amounts, and types of assets and liabilities and other factors, as well as the ratio of liquid assets to total assets of credit institutions.
Investment regulations
Abroad by banksAuthorized banks with general licenses from the CBR may transfer foreign exchange balances to banks in the FATF and OECD member countries and Belarus for purposes of participating in their authorized capital with CBR notification, and to other countries with CBR approval.
In banks by nonresidentsNonresidents may undertake investments in the authorized capital of resident credit institutions with CBR approval.
Open foreign exchange position limitsThe open foreign exchange position of commercial banks is 20% of capital for all currencies and 10% of capital for an individual currency or precious metal. These limits are calculated based on the volume and date of transactions.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsNo.
Changes During 2004
Resident accountsJune 7. Residents were required to open three types of accounts—F, R1, and R2—with authorized banks for certain foreign exchange transactions with nonresidents.
June 18. Residents were allowed to open accounts at foreign banks in OECD or FATF member countries without approval, provided that the funds credited to these accounts were not used for commercial purposes.
August 1. Reserve requirements were established as follows: 3% for 365 days for R1 accounts and 50% for 15 calendar days for R2 accounts.
Nonresident accountsJune 18. Five new types of accounts for nonresidents—A, O, S, V1, and V2—were introduced for the channeling of certain settlements and transfers associated with purchases and sales of capital.
June 18. K, N, and S accounts were abolished and any balances in these accounts were required to be transferred.
July 1. Nonresidents were allowed to transfer funds from K, F, and S accounts abroad and to other domestic accounts in their name freely, subject to reserve requirements.
August 1. Reserve requirements were imposed as follows: 20% for 365 calendar days for S accounts; 3% for 365 calendar days for O accounts; 50% for 15 calendar days for V1 accounts; and 3% for 365 calendar days for V2 accounts.
Imports and import paymentsApril 10. MOF approval is no longer required for advance payments for imports exceeding the equivalent of $10,000.
June 18. The period for which residents could make advance payments for imports without restriction was increased to 180 days from 90 days, if the contract was secured by an irrevocable LC, a bank guarantee, a property insurance agreement, or a bill backed by a nonresident bank.
Exports and export proceedsDecember 27. The surrender requirement applying to proceeds from exports of goods, services, and intellectual property of residents was reduced to 10% from 25%.
Proceeds from invisible transactions and current transfersDecember 27. The surrender requirement applying to proceeds from exports of services and intellectual property was reduced to 10% from 25%.
Capital transactionsJune 18. Special accounts were required to be used for capital transactions.
August 1. A provisioning requirement was imposed on certain transactions requiring the use of special accounts.
Controls on capital and money market instrumentsApril 1. The power to authorize the issuance or sale of debt securities abroad by resident was transferred to the FSFR from the FKRTsB.
April 1. The power to authorize the issuance or sale of domestic securities abroad by residents was transferred to the FSFR from the FKRTsB.
June 18. Resident natural persons could purchase securities abroad using accounts opened abroad.
June 18. Authorized banks were allowed to sell freely securities to nonresidents for foreign currency on their behalf and on behalf of clients.
June 18. The limit below which foreign exchange transactions relating to purchases and sales of foreign and domestic securities could be effected without restriction was increased to the equivalent of $150,000 from $75,000.
June 18. Nonresidents could sell to residents securities denominated in rubles for rubles (but settled in rubles or foreign exchange) without restriction.
August 1. The regulations governing transactions pertaining to the purchase locally by nonresidents of shares or securities of a participating nature were applied to local purchases by nonresidents of bonds and other debt securities.
Controls on credit operationsAugust 1. Financial credits by residents to nonresidents were required to be channeled through the appropriate resident and nonresident accounts.
August 1. Financial credits from nonresidents to residents were allowed to be conducted freely.
Controls on real estate transactionsJune 18. Residents were allowed to purchase real estate abroad freely. Previously, purchases required CBR authorization.
Provisions specific to commercial banks and other credit institutionsApril 1. The reserve requirement ratio for ruble liabilities to legal entities and for foreign currency liabilities to legal entities and individuals was reduced to 9% from 10%.
June 15. The reserve requirement ratio for ruble liabilities to legal entities and for foreign currency liabilities to legal entities and individuals was reduced to 7% from 9%.
July 8. The reserve requirement ratio for ruble liabilities to legal entities and for foreign currency liabilities to legal entities and individuals was reduced to 3.5% from 7%.
August 1. A provisioning requirement 2% was imposed on ruble and foreign currency obligations of credit institutions to nonresident banks.
Changes During 2005
Resident accountsJune 18. Residents were permitted to open foreign currency denominated accounts abroad, with banks in OECD and FATF member countries, provided they notify the tax authorities at their place of record.

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