Russia’s central bank has sharply tightened currency restrictions amid crippling Western sanctions over Moscow’s aggression on Ukraine.
The bank on Tuesday announced citizens with foreign currency accounts would not be allowed to withdraw more than $10,000 until Sept. 9 and told commercial banks to stop selling hard currency to clients.
Any withdrawals above that amount would be converted to rubles at the current exchange rates.
The bank, which earlier in the day announced a series of steps to help financial market players hit by foreign sanctions, said in a statement that regardless of what foreign currency clients held in their accounts, withdrawals would be paid in United States dollars.
Between March 9 and Sept. 9 “the banks will not be able to sell foreign currencies to citizens,” said the statement, a measure that will likely foment a black market for hard currency.
It added that Russians would however be able to change foreign currencies into the local ruble unit during that window.
Customers would be able to exchange any amount of foreign currency for rubles at any time, it added, and cash withdrawals from foreign currency accounts at Russian banks will be limited to $10,000 until Sept. 9.
Withdrawals on such accounts will only be permitted in dollars irrespective of the currency in which the account is denominated.
It may take “several days” for the banks to supply the necessary amount of foreign currency to the actual office, it added.
The central bank noted that the currency controls were tightened because of the Western sanctions that froze a large share of its hard currency reserves. The crippling blow to the country’s financial system also prevented Russia from getting foreign cash.
The ruble hit an all-time low against Western currencies on Monday after Russia was hit by unprecedented sanctions targeting the monetary authority and major financial institutions.
The draconian restrictions are unprecedented since Soviet times when the authorities maintained strict hard currency controls.
On Tuesday, the Russian economy was dealt another blow when U.S. President Joe Biden imposed an embargo on imports of Russian oil and gas.