Russia admits that it has not found a reserve option instead of USD, euro

Russian gold bars – Photo: RUSSIA BEYOND

Before Russia’s military campaign broke out in Ukraine on February 24, the Central Bank of Russia spent many years reducing the percentage of dollar reserves, bringing the proportion of USD of this bank to just under 11% by the end of 2021, according to News Agency Bloomberg.

In addition, more than a third of Russia’s total reserve investment is in euros, in addition to a number of other reserve currencies such as the British pound and the Japanese yen.

The above figures show that the governments of many countries, mostly Western, could seize about half of Russia’s foreign currency reserves in response to Moscow’s launch of a military operation in Ukraine.

According to governor Elvira Nabiullina, more than a month after the war, the Central Bank of Russia has not yet identified other reserve options. Speaking on April 18 before a parliamentary committee in Moscow, she said it was too early to draw lessons from recent decisions.

“We need to look to the future, but right now I’m working to make specific recommendations,” Nabiullina said.

Due to Western sanctions, the Central Bank of Russia cannot intervene in the market to protect the ruble. This prompted the bank to impose capital controls and raise interest rates urgently to reassure the market.

On February 18, the reserves of the Central Bank of Russia reached a record high of 643.2 billion USD. The amount of reserves then plummeted before stabilizing in recent weeks.

The yuan accounted for 17.1% of Russia’s total reserves at the end of 2021, up from 12.8% a year earlier. While the proportion of gold is at 21.5%.

When asked if the central bank plans to retaliate against countries that freeze Russian assets, Nabiullina said “certainly we are planning these legal actions”.

However, “this issue must be thought through very carefully and rationally to achieve the desired result”, Ms. Nabiullina stressed.