The Bank of Russia will probably intensify interventions and spend almost a sixth of its reserves after its emergency increase of interest rates failed to stem the ruble's worst crisis since 1998, according to a survey of economists.

Unlimited currency interventions are the most likely response to the ruble's freefall, and the central bank will deploy $70-billion to counter the turmoil, according to the survey of 18 economists and the median of estimates given. Further rate increases and the imposition of capital controls ranked as the next most probable policy actions.

The country's $416-billion reserves are moving back into the first line of defense against the crisis ravaging Russia after the central bank shifted to a free-floating exchange rate ahead of schedule last month. It's failed to prop up the ruble with 750 basis points of rate increases and more than $8-billion of interventions this month, allowing the currency to sink beyond 80 a dollar, a record low.

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"The full-blown crisis of confidence requires nothing less than aggressive, committed FX intervention," Phoenix Kalen, an emerging-market strategist at Societe Generale SA in London, said by e-mail. "With that said, the window of time for which direct intervention would be effective in staunching the ruble bloodbath is quickly running out, beyond which the next set of measures to be contemplated would likely be capital controls."

Fifth Drained

The central bank, led by Governor Elvira Nabiullina, has so far been unable to reverse the currency plunge even after spending a fifth of its international reserves this year. It can use $85-billion for currency operations next year in case of a crisis scenario that puts crude at $60 a barrel, Nabiullina, a former economy minister and aide to President Vladimir Putin, said Dec. 11.

Decisive policy action that may include interventions or currency controls will probably be unveiled in the next few days, according to nine of the 18 economists surveyed by Bloomberg.

"Concerted action by the government and President Putin to support the central bank's stabilization efforts is likely, such as putting more intensive pressure on exporters to sell foreign currency," said Tatiana Orlova, the chief economist for Russia at the Royal Bank of Scotland Group Plc in London.

Capital Controls?

To counter the panic sweeping the currency market, Russia has urged exporters to convert more of their foreign income to help stem the ruble's tumble. Prime Minister Dmitry Medvedev said last week the government is in talks with large companies to even out their sales of foreign revenue.

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That has sparked speculation that foreign-exchange controls were imminent.

Russia isn't discussing any such restrictions, according to Economy Minister Alexei Ulyukayev. Nabiullina, Finance Minister Anton Siluanov and the Kremlin's chief economic aide Andrey Belousov attended a meeting at Medvedev's residence yesterday.

The surprise rate increase announced in the middle of the night in Moscow has failed to stem the run on the currency. The 6.5 percentage-point move, to 17 per cent, only stoked a brief rally in the ruble before it began falling. Central bank First Deputy Governor Sergey Shvetsov described the emergency increase as a choice between "very bad and very very bad."

Excessive Price

"If the central bank were to hike the key rate above 20 per cent, real economic growth would be annihilated next year, and economic contraction would be measured in multiples of a percentage point," said Cristian Maggio, head of emerging markets research at Toronto-Dominion Bank in London. "I don't think the central bank would be ready to pay this price."

The ruble has been under pressure since Russia's takeover of Ukraine's Crimea in March prompted sanctions and oil, trading at its five-year low, sent the currency into a tailspin. Russia gets about 50 per cent of its revenue from oil and gas taxes.

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Not a single economist in the survey identified a dramatic change in Putin's approach to the conflict over Ukraine as the most likely step to defuse the currency crisis.

"Economic calculus does not seem to steer Putin's Ukraine policy," said Wolf-Fabian Hungerland, an economist at Berenberg Bank in Hamburg. "If that would have been the case, he would not have invaded the Ukraine in the first place. Rather, Putin seems to balance de-escalating moves with escalating ones."