John J Hardy
In this latest webinar, Saxo Bank's head of FX strategy John Hardy analyses the market after the central bank of Turkey announced a huge rate hike.
Article / 22 December 2014 at 14:31 GMT

Higher rates and tax payments underpin ruble — for now

Russia oil and gas expert
United Kingdom
  • Ruble recovers against dollar and euro
  • Support from month-end tax payments
  • Mineral exploration tax to rise next year

By Nadia Kazakova

Whatever it was, it is over for now. The firefighting measures to stabilise the ruble appear to have worked. The Russian currency has recovered both against the dollar and euro since its collapse a week ago. 

Higher borrowing rates in the interbank market (the overnight rate was more than 30% last week) must have made it more difficult to borrow/leverage to play against the ruble. A hike in ruble deposit rates to as high as 18-20% may have helped to stem the outflow of retail money from the banks and into the FX. 

The markets must have taken comfort from the fact that the central bank did not seem to spend too much of its international reserves amid the panic and confusion. Central bank interventions totalled $1.96 billion over the four days last week (data for Friday is as yet unavailable) while the bank was absent from the MICEX altogether, except for Monday. The Ministry of Finance spent $500 million from sovereign funds on Thursday.

Chart: FX interventions and USDRUB rate since free float announcement on Nov 10

Rosneft has officially announced that it paid off $7 billion on December 22 without having to buy currency from the market. In total, Rosneft repaid $24 billion in 2014. The company has a tough debt repayment schedule for next year: $19.5 billion, including around $7 billion in February 2015.

Chart: Rosneft's debt repayment schedule, 2014-2018

Rosneft would be repaying its FX debt through foreign currency earnings while spending rubles (raised via bonds and, potentially, from Nation's Wealth Fund) to finance its capex. Effectively, the company is refinancing its foreign debt into relatively cheap rubles. 

Some extra support for the ruble could be coming from the month-end tax payments. Mineral exploration tax (production royalty) is due on December 25 (for November) and the profit tax is payable on December 29. 

The mineral exploration tax (MET) on crude oil production was 5,491 roubles per ton ($16.3/bbl) in November, based on average Urals oil price for the month of $78.3 per barrel and USDRUB rate of 45.9. The drop in the ruble would allow the oil companies to save around 10% on their production taxes for November, and they would need to sell 10% less FX now to pay their tax bill. 

From January next year, the mineral exploration tax will rise substantially, as the tax base rate is to increase by 55%. Under the current tax regime, with Urals at $58 per barrel and USDRUB at 49.5, MET is around $11/bbl. From January 2015, the rate would be $17/bbl assuming current oil price/ruble rate. At the same time, export duties on oil and oil products will be reduced.

Theoretically, it should force oil companies to sell more FX to pay the tax. In practice, the fall in the oil and the ruble should not take the payments (when calculated in rubles) much higher of those seen throughout most of 2014. If the Urals oil price averages $60 per barrel and USDRUB is 50, the annual MET tax bill in rubles for 2015 should be little different from the previous year.  

Chart: Mineral exploration tax, Urals oil price and USDRUB
Source:, author's estimates. Note: the rates for December 2014 and January 2015 are calculated based on oil price/ruble as of December 19.

-- Edited by Kevin McIndoe

Nadia Kazakova is a specialist on Russia, particularly the oil and gas sector.

net net
мне тожекажется все нормально и скоро мы станем похожи на китай когда нефтькончится, но на данный момент 100 рублей за доллар это именно то что нужно экономике РФ и в этом даже для меня есть определенный плюс при всем отторжении глобального плана управления миром, который очень сильно задавливает прогресс из за глупых любителей власти и роскоши, но если РФ станет страной производителем это ещенемного да прибавит КПД мировому прогрессу и он еще немного ускорится в движении.


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