Vladimir Putin has eased forex requirements on timber, energy, and agricultural exports – with Russia’s Central Bank pointing to a surge in export revenues and sky-high interest rates to help stabilise the rube.
Under the updated government decree, published on May 30, the bar has been lowered to 50% of all trade to be sold in Russian rubles.
It comes after the Russian government, in October, signed a decree to see “the mandatory sale of revenue in foreign currency received by Russian exporters under foreign trade agreements. The decree impacted Russia’s 40 largest exporters in forest products, grain, fuel, energy, black and non-ferrous metallurgy and chemicals.
Under the rules renewed for 12 months in April, companies must repatriate and sell foreign currency proceeds on the Russian market to stabilise the Ruble. Additionally, companies must submit indicative plans and schedules for purchasing and selling foreign currency in the domestic market to the Bank of Russia, the country’s central bank.
According to Russian media, “certain Russian exporters were required to deposit no less than 80% of foreign currency earnings with Russian banks, and then sell at least 90% of those proceeds on the domestic market.” The Central Bank has “long voiced doubts over the controls’ efficiency” and its ability to stabilise the Ruble.
In October, First Deputy Prime Minister of Russia Andrey Belousov said the main goal of the measures was to create long-term conditions for increasing transparency and predictability in the foreign exchange market and reducing the possibility of currency speculation.
At the time, Wood Central reported that the foreign trade of Russian timber plunged more than 20% to 4.5 million cubic metres during the first quarter of 2023, with that drop attributed to the EU’s sanctions against Russia over the war in Ukraine.
Who is buying Russia’s exports?
Last month, Wood Central reported that Russia now accounts for 63% of all softwood lumber imports entering China’s mega port system. This year alone, Russia and Belarus have accounted for 3 million cubic metres (or 70% of total imports), with Russia supplying 2.71 million and 269,000 cubic metres (a 38% increase).
In raw numbers, more than 90% of lumber produced by Russia now enters China, as well as 85% of raw logs – primarily birch, aspen, and poplar raw logs – which are part of a “gang of eight” trade into Belarus, Iran, Georgia, Tajikistan, Kazakhstan, Uzbekistan and Kyrgyzstan.
In addition, Japan is also a highly lucrative market for Russian lumber (and glulam). New data from the Japanese Ministry of Finance report that Japan took 49,400 cubic metres of Russian lumber in April alone—a 16,000 cubic metre increase from April 2023.
Japan—the world’s fourth largest consumer market for imported timber—is behind China and Uzbekistan, Russia’s top export markets for lumber. Despite a raft of Western countries introducing heavy sanctions on Russian imports—including the EU and UK—Japan still accounts for 13% of glulam produced by Putin-connected mills.