Aksakov called for weakening the ruble by 30-40% in his video blog on Thursday. "Products will become competitive <...> factories will start working, jobs will appear, [from this] banks will benefit – debts from enterprises will start coming in. And the debts of enterprises will depreciate, because devaluation is accompanied by inflation" – this, according to Aksakov, is the benefit of devaluation.

If the ruble were to depreciate sharply now, banks with a large net foreign exchange position would immediately win, i.e. those whose foreign exchange assets significantly exceed their foreign exchange liabilities, says Renaissance Capital analyst Andrey Markov. As of July 1, Gazprombank (418.4 billion rubles) and VTB (116.1 billion rubles) had the largest net foreign exchange position, according to balance sheets, according to analyst Maxim Osadchiy. UniCredit Bank (30.5 billion rubles), Rosselkhozbank (17 billion), and Globex (11.1 billion) had a much smaller, but still significant position. Foreign exchange assets exceed foreign exchange liabilities by more than 1 billion rubles for 34 banks. The Central Bank limits the size of the net foreign exchange position, but banks can bypass this limitation by hedging with the help of affiliated companies, says Osadchiy.

The Central Bank does not share this opinion, Aksakov soon clarified to the RIA Novosti agency: "[Central Bank Chairman Sergei] Ignatyev said that he will not do this. They consider my forecast to be incorrect and are expecting an economic recovery in the fall." The next day, the deputy issued a statement in which he admitted that there was no reason for devaluation and the Central Bank would not go for it.

This is not Aksakov's first call for devaluation. In an interview published on July 28 by the Russian Business Newspaper (published by the Federal State Institution "Editorial Office of the Rossiyskaya Gazeta"), he called the most effective measure for solving the problem of bad debts "a one-time and fairly sharp (by 25-30%) devaluation of the ruble."

This time, the call for devaluation did not go without consequences. State Duma Deputy Speaker Vyacheslav Volodin (United Russia) called Aksakov's proposal anti-people, accused him of defending the interests of oligarchs and big business, and promised to make a motion to recall the deputy from the NBS (the Duma quota is three seats). "If the party leadership makes such a decision, we will support it," Vladislav Reznik, Chairman of the State Duma Committee on Financial Markets and member of the NBS (Aksakov is a member of the committee), told Vedomosti, adding that he himself considers a sharp devaluation "categorically unacceptable."

Who needs devaluation?

Calls for devaluation from the banking sector are not surprising: when the exchange rate fluctuates, banks earn more than when it is relatively stable, notes a senior Central Bank official.

As a result of the weakening of the ruble, the 30 largest banks earned 58.3 billion rubles in January – twice as much as in the non-crisis January of 2008.

"A 30-40% devaluation of the ruble would help the real sector. In our opinion, this position [of Aksakov] corresponds to the opinion of the market, which this time does not expect the Central Bank to intervene in support of the ruble. Market participants fear that the injection of 180 billion rubles into VTB's capital will flow into the currency market," wrote Natalia Orlova, chief economist at Alfa Bank, in her review.

The Central Bank, commenting on Friday on the reduction of the refinancing rate by another 0.25 percentage points, warned of possible high volatility of the ruble exchange rate.

Valery Mironov, Deputy Director General of the HSE Development Center, also supports devaluation. Thanks to the weakening of the ruble that has already occurred, one of the main indicators of industrial competitiveness – unit labor costs – fell in January-May by the same amount as output fell: by 15%, he calculated. A new weakening of the ruble could be a source for moving forward, the economist believes. Its strengthening only eats away at the head start the economy has received, he complains.

Bankers deny any interest in devaluation. "So what if we have a large net foreign exchange position - that's because 40% of our products are imported and we physically have nowhere else to get them from!" exclaims Yuri Trushin, Chairman of the Board of Rosselkhozbank. He is against a new devaluation - it will strangle importing clients. "It's nonsense that banks are interested in devaluation: well, there will be a little on the profit and loss account, the balance sheet currency will grow - so what?" reasons Mikhail Alekseev, Chairman of the Board of UniCredit Bank.

Not all banks need devaluation – those with many borrowers with loans in foreign currency without corresponding foreign currency revenue would suffer losses some time after devaluation, notes Markov, and in the event of a sharp weakening of the ruble, an outflow of depositors’ funds is also likely.

A weak ruble is beneficial to the budget: a 10% weakening of the ruble will bring the treasury about 1.2 trillion rubles due to the exchange rate revaluation of national funds and oil and gas revenues, according to calculations by Unicredit economist Vladimir Osakovsky.

This also has a negative effect, points out Yevgeny Gavrilenkov, chief economist at Troika Dialog: the weaker the ruble, the smaller the economy and the more difficult it is for the country’s leaders to participate in international life.

Devaluation will again pose the problem of foreign debt repayments and inflation – its surge in January-March, according to Osakovsky, was caused exclusively by the exchange rate. Inflation in Russia is higher than in other G20 countries, IMF experts note, calling for fighting it: it does not allow generating long-term financing and restrains the development of production.

If the ruble does not weaken, by the end of the year the gain from devaluation will be only 2%, calculated economist of the Center for Macroeconomic Analysis and Short-Term Forecasting Oleg Solntsev. But a new portion of industrial devaluation is unlikely to help if demand does not grow, and if it does, it is not a fact that consumers will prefer to return to lower-quality goods, Solntsev argues. Devaluation did not lead to import substitution; the entire collapse of imports occurred due to a contraction in demand, he points out.

A weak ruble is beneficial for exporters who receive income in foreign currency, but strengthening does not pose a risk for them if it is accompanied by rising oil prices, according to Citi economist Alexander Korneev. Since February, every 1% increase in oil prices has led to a strengthening of the ruble by 0.3%. With such synchronicity, every 1% increase in the price of a barrel increases the annual EBITDA of oil companies by 0.8%, he calculated.

Will there be a devaluation?

Talk of devaluation is “some kind of meaningless incantation,” Gavrilenkov believes: “The entire rational world has come to the conclusion that the exchange rate is a market value <...> a compromise that must satisfy everyone: the population, banks, enterprises. No official can bring these interests together.” The pound, for example, also falls and strengthens, but no one in the British parliament would think of declaring that the exchange rate should be strengthened or weakened, Gavrilenkov compares: “It’s simply indecent.”

This year, the Russian Central Bank for the first time began to adhere to the policy that the exchange rate is a market value, he points out. As stated by the First Deputy Chairman of the Central Bank Alexey Ulyukayev, the regulator will intervene only to smooth out trends. In July, for example, the Central Bank sold currency for the first time in five months - $3 billion and 0.576 billion euros, according to statistics published on Friday. The regulator intervened to contain the weakening of the ruble due to the fall in oil prices on July 10 and 13, dealers believe. In July, the ruble fell by 2.3% against the dollar and by 1.9% against the euro. On Friday, the ruble weakened by 0.4% against the bicurrency basket.

This approach was approved by the IMF: if there is another threat of a sharp fall in the ruble, it should be supported by reserves, the fund said in a report released on Friday, but such measures should not be a regular practice – the rate should be left to the market.

Prices on the external market, which affect the balance of payments, do not currently create a reason for devaluation, Gavrilenkov continues. "The current account balance is extremely strong, there is no need for devaluation from the point of view of the balance of payments," Solntsev agrees. The exchange rate is in equilibrium: the ratio of money supply to reserves as of July 1 (there is no data on the money supply as of August 1 yet) is 31.8 rubles/$.

Since the beginning of the crisis, the ruble has weakened against the dollar by 25%. The ruble has been devalued much more than many other currencies (see table), perhaps the Central Bank overdid it, focusing on the forecast of oil price of $30 per barrel, believes Vladimir Tikhomirov, an economist at Uralsib. Since the beginning of the year, the average price of a barrel of Russian Urals oil is $53.2, on Friday it cost $73.7.

On the other hand, financing a huge budget deficit could oversaturate the market with rubles, and then the exchange rate would weaken even without external reasons, says Gavrilenkov.

This is exactly what will happen in the last quarter, economists from ING, Alfa-Bank, Trust, Unicredit, Merrill Lynch, Barclays Capital expect. According to their estimates, by the end of the year the ruble may approach 39-41 rubles for the bi-currency basket, i.e. weaken by a maximum of 10%. The fourth quarter will also see the peak of payments on external debt (about $20 billion), which will create increased demand for currency, adds Merrill Lynch economist Yulia Tseplyaeva.

Will answer for the ruble