New US Sanctions Prompt Suspension of Dollar, Euro Trading on Moscow Exchange

The Moscow Exchange has halted trading in US dollars and euros following the new sanctions imposed by the United States, the Central Bank of Russia announced on Thursday.

The latest sanctions target Russia's financial system, specifically aiming to disrupt the flow of money and goods that support its military activities in Ukraine. The US Treasury stated that the sanctions are designed to "target the architecture of Russia's financial system, which has been reoriented to facilitate investment into its defense industry and acquisition of goods needed to further its aggression against Ukraine."

As a result, banks, companies, and investors will no longer be able to trade dollars or euros via the centralized Moscow Exchange, which traditionally provides better liquidity and oversight. Instead, all transactions will now occur over the counter (OTC), where deals are made directly between two parties. The Central Bank assured that it would use data from these OTC trades to set official exchange rates.

Russian citizens hold savings in dollars or euros as a safeguard against the ruble's periodic devaluations. However, the Central Bank reassured the public that these deposits remain secure despite the new trading restrictions.

The suspension follows Washington's recent announcement of a new round of sanctions aimed at limiting Russia's financial capabilities to continue its military operations in Ukraine. The sanctions have deepened the rift between Moscow and Western nations, bringing relations to their lowest point since the Cold War.

Since the start of Russia's "special military operation" in Ukraine in February 2022, the West has implemented severe sanctions that have heavily affected Russia's economy and also targeted government officials and their families.

The broad range of Western sanctions has included measures against major Russian financial institutions, sovereign debt, and wealthy individuals. These actions are intended to restrict Moscow's ability to finance the war. Notably, the sanctions prevent Russia from raising funds from Western financial markets.

In addition, Western countries excluded sanctioned Russian banks from SWIFT, the international payment system used by thousands of financial institutions worldwide. Existing sanctions also blocked Russia from importing critical technologies for various sectors, including defense, energy, telecommunications, and aviation.

The Central Bank noted that approximately 60 percent of foreign exchange trading in Moscow is now conducted OTC. By basing the official ruble exchange rate on these OTC trades, the Central Bank aims to maintain some stability in the market despite the new constraints.