US Stocks Slide, Ruble Plunges As Russia Prepares Capital Controls

Just days after Ukraine began discussing capital controls, and Russian lawmakers passed a bill enabling asset freezes, it appears Russia has reached its limit.

*RUSSIA SAID TO WEIGH CAPITAL CONTROLS IF NET OUTFLOWS INTENSIFY

The Ruble is plunging towards 40 to the USD (CB intervention levels), US equity futures gapped lower, and European stocks are sliding.

As Bloomberg reports,

Russia’s central bank is weighing the introduction of temporary capital controls if the flow of money out of the country intensifies, according to two officials with direct knowledge of the discussions.

Such measures would be preventative and used only if net outflows rise significantly, the people said, who asked not to be identified because no decision has been made. They didn’t give a timeline or a level that may force such a move, saying they are looking at all possible scenarios.

The discussions are the latest sign that U.S. and European sanctions are hurting Russia and rethink policies the central bank has sought to avoid. The Economy Ministry last week raised its estimate for this year’s outflows to $100 billion from $90 billion. Russia hasn’t had a net inflow of private capital since 2007, the year after lifted restrictions.

Central bank Chairman Elvira Nabiullina, a former economic aide to President Vladimir Putin, said in an address to the government on Sept. 25 that “introducing capital controls doesn’t make sense.”

Still, if trades restrictions — such as the U.S. and EU sanctions and Russia’s retaliatory measures — are prolonged and the tax burden rises, capital outflows will intensify. That will push the regulator to shift its focus more toward ensuring financial stability from fighting inflation and use various instruments “including non-standard” means, Nabiullina said.

The central bank’s press service declined to comment. The Finance Ministry isn’t discussing such measures, Svetlana Nikitina, a spokeswoman, said by text message.