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. Last Updated: 07/27/2016

State Moves to Ban Dollar-Denominated Prices




The government moved Tuesday to stop businesses from quoting prices on domestically produced goods in U.S. dollars, saying a ban would boost the weak ruble by loosening the dollar's grip on the economy.


Economists and entrepreneurs immediately lashed back, saying a ban would be poor economic planning and would only create a terrific headache for businesses, which would be forced to tear up their prices every day.


"It's the same as forcing everybody to write their price tags in black ink," said Sergei Trukhachyov, vice president of the consumer rights advocacy group KONFOP. "In my opinion the measure is meaningless."


First Deputy Economics Minister Andrei Svinarenko announced at a Cabinet meeting Tuesday that the ministry has drawn up draft amendments that forbid companies from posting dollar-denominated prices on Russian products and services. The amendments have been submitted to the government.


The announcement won quick support from First Deputy Prime Minister Yury Maslyukov, who holds top responsibility for the nation's economic policies.


"Liberties are being taken when [companies] set prices," Maslyukov was quoted by Prime-Tass as saying.


"Someone catches the fish and somebody is losing out," he said, using the Russian expression "to catch fish in muddied waters" to describe the improprieties made possible by the practice.


There should be "strict regulations on who may quote prices in hard currency or units and who may not," he said.


A Maslyukov spokesman could not clarify the minister's remarks and Svinarenko could not be reached.


The proposed ban is the latest state effort to prop up the ruble. Earlier this month, the government submitted a bill to the parliament to toughen penalties against the export of hard currency under fake import contracts.


The government also suggested imposing a $5,000 ceiling on the amount of hard currency that Russians can take out of the country and restrict the amount exported by foreigners to the sum that they brought into the country.


Another resolution under consideration envisions a new Interior Ministry department to combat money laundering, the Interior Ministry said Tuesday.


By pushing a dollar price ban, the Economics Ministry is struggling to keep the rate of inflation at the lowest possible level by making it independent of the dollar, said Vladimir Tarachyov, deputy head of parliament's budget committee.


The ministry hopes prices will grow more slowly because retailers "cannot be bothered to change prices every day, and there will be a time lag," he said.


The ban is probably meant to lower inflation and depreciation expectations but will only have a "minor effect," said Peter Westin, an analyst with the Russian-European Center for Economic Policy. "It looks like a shot in the dark."


Business leaders agreed. Sergei Bagayev, president of the Moscow retailers' association, said people who lease or sell their apartments will continue to set prices in dollars no matter what as long as the ruble remains unstable.


By banning dollar prices the government can only "close down the market," Bagayev said.


"What's for sure, I would have to change prices every day," said Boris Linyov, director of a car dealership trading Russian models.


"This may be justified, but there will be more headaches," even though the company will incur no additional expenses, Linyov said.


However, some retailers who already set their prices in rubles or offer imports to wealthy customers said not only would they be unaffected by the restriction but they could even profit from it.


Scott Adesso, director of the Starlight Diner, said the measure might turn out to be a "nice twist" for the diner if restaurants offering domestic foodstuffs don't have the advantage of setting prices in dollars, Adesso said.