Capital Controls Coming to Russia?

If the ruble has another week like this, it’s almost inevitable:

The currency has been in freefall since Saudi Arabia and the Gulf states vetoed calls by weaker Opec members for a cut in crude oil output, a move viewed by the Kremlin as a strategic attack on Russia.

A fresh plunge in Brent prices to a five-year low of $67.50 a barrel on Monday caused the dam to break, triggering a 9pc slide in the rouble in a matter of hours.

Analysts said it took huge intervention by the Russian central bank to stop the rout and stablize the rouble at 52.07 to the dollar. “They must have spent billions,” said Tim Ash, at Standard Bank.

It is extremely rare for a major country to collapse in this fashion, and the trauma is likely to have political consequences. “This has become disorderly. There are no real buyers of the rouble. We know that voices close to president Vladimir Putin want capital controls, and we cannot rule this out,” said Lars Christensen, at Danske Bank.

Back in the bad old days, the official exchange rate for the Soviet ruble was… whatever it was. It isn’t worth remembering because the rate was a pure fiction. There was the official exchange rate, and then there was how many dollars you could actually get for a ruble — which was significantly less. When Western companies were allowed, in very limited numbers and in very limited ways, to do business in the USSR, the real trick was figuring out a way to repatriate any profits, because the ruble was just no good. And — we mustn’t forget this one tiny little detail — it was forbidden, comrade, to remove any rubles from the USSR.

Pepsi struck a sort of high-class barter arrangement: In exchange for selling Pepsi the babushkas in Russia, it could export Beluga caviar to the West. I’ve forgotten what mad scheme McDonalds had come up with to justify its massive Moscow outlet in the mid-’80s, but the USSR collapsed too soon after for it to matter.

It looks like the bad old days are coming back, as Putin’s neo-Soviet foreign and domestic policies drive Russia to its inevitable ruin.

Re-ruin?