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Sanctions Fragment Russian Currency Market, Creating Multiple Exchange Rates
The US sanctions on the Moscow Exchange in June 2024 led to the cessation of dollar and euro trading, resulting in a fragmented OTC market with multiple exchange rates and decreased transparency, impacting businesses and consumers differently.
- What immediate impact did US sanctions on the Moscow Exchange have on the Russian currency market?
- On June 13, 2024, the Moscow Exchange halted trading of US dollars and euros due to US sanctions against the exchange and its subsidiaries. The Central Bank now calculates the official ruble exchange rate using over-the-counter (OTC) market transactions.
- What are the long-term consequences of the current fragmented and opaque Russian currency market for businesses and consumers?
- The absence of a transparent, centralized exchange and the cessation of public OTC data have increased volatility and the spread between buying and selling rates. This opaque system benefits large banks and exporters while disadvantaging importers and consumers, highlighting the systemic impact of sanctions.
- How has the lack of a central clearinghouse, like CLS Bank, affected the transparency and stability of the Russian currency market?
- The sanctions against the National Clearing Center (NCC) prevented it from facilitating transactions, leading to a fragmented OTC market dominated by major banks. This lack of a central clearinghouse, unlike the global norm of using CLS Bank, resulted in multiple exchange rates.
Cognitive Concepts
Framing Bias
The article frames the situation negatively by emphasizing the volatility and lack of transparency of the current system, highlighting the downsides of the post-sanctions market. The headline itself contributes to this negative framing, focusing on the multiple exchange rates.
Language Bias
The article uses language that leans towards a negative portrayal of the post-sanction market. For instance, words like "лукавства" (deceit) and phrases such as "фрагментированным" (fragmented) contribute to this negative tone. More neutral language could be used to describe the changes in the market, focusing on the shifts rather than using overtly negative descriptions.
Bias by Omission
The article omits discussion of the potential benefits of the current system, such as reduced reliance on a single clearinghouse or increased resilience to sanctions. It also doesn't explore alternative clearinghouses that might have been used.
False Dichotomy
The article presents a false dichotomy by implying that the only options are a fully functioning, centralized exchange like before the sanctions or the current fragmented system. It doesn't explore other potential market structures or solutions.
Sustainable Development Goals
The sanctions and subsequent fragmentation of the Russian currency market have led to a multiple exchange rate system, increasing volatility and creating uneven access to currency. This disproportionately affects smaller banks and businesses, exacerbating existing inequalities. Those with access to international banking networks, such as some larger banks, benefit, widening the gap between them and others.