Russia to impose limits on foreign currency purchases

FOREX website reported that Russian central bank plans to impose restrictions on foreign currency purchases for private citizens from 20 October. There will be limit of currency that can be sold to one person per day. The exact sum is not yet known.

http://www.forbes.com/afxnewslimited/feeds/afx/2008/10/17/afx5569974.html

If this information is confirmed (Russian media have not reported on this yet), it will serve a massive blow to the Putin Russia’s stability. Apparently Russian hard currency reserves have been substantially diminished in the past few weeks because of the investors’ flight from the country and the government is wary of supporting Russian rouble for too long time.

If rouble falls significantly it will put an effective end to the Putin’s mythical stability and may even destabilize Russia in short term perspective – within 1-2 years.

As many authors have pointed out, Putin and his model of Russia have been supported by the Russian population, because Putin’s reign coincided with rapid economic development of Russia and constant economic growth made vast majority of the population to think, that soviet type of stability has finally arrived in Russia – when prices stay almost fixed, life improves, according to the media under state control, the state is feared and respected by everybody abroad, etc.

A simple thing like quick fall of Russian rouble against US dollar and euro is likely to open many Russian eyes and make them realize that USSR is past that cannot be returned.

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