Gold and foreign currency reserves in Russia currently amount $582 billion USD, putting it in the top four nations worldwide. The following countries also rank in the top five of these indicators based on the examination of data from different Central Banks.
- China ($3.31 trillion)
- Japan ($1.27 trillion)
- Switzerland ($924 billion)
- India ($563 billion)
In the spring of 2022, Western countries froze almost $300 billion, or more than half of Russia’s total gold assets. On retaliation for these actions, Russia has frozen the assets of “unfriendly states” in Russian territory.
The Western sanctions’ principal purpose in blocking economic assets was to damage the now-stronger Russian Ruble. Because of this, the frozen funds can’t be utilized to conduct foreign exchange operations, which would otherwise help calm the currency market.
Only the Chinese RMB Yuan and gold were still in Russia’s control among its liquid foreign currency assets. Despite Russia’s record current account surplus in 2022, the country’s central bank did not replenish its international reserves with foreign currency. Instead, the revaluation of Russian assets in US dollars was responsible for the country’s economic revival.
The national budget of Russia has also undergone some recent changes. The Russian government has unveiled a brand-new budget and set of regulations for the year 2023. If oil and gas income above a certain threshold, the surplus will be converted into Chinese RMB Yuan and used to replace Russian reserves. The RMB Yuan reserves, on the other hand, will continue to be utilised to make up for declining oil and gas income, given Russia’s prominence in the oil industry.
The growing Russian reserves
When it comes to sanctions and the freezing of sovereign assets, the United States is proposing something unprecedented: the transfer of assets from a foreign Central Bank to a third nation. The United States government has been talking about Ukraine, but it could also use Russia’s assets to support its own debt by expropriating them.
To do so would likely result in a heavy fine, as other nations would move to remove their assets from US ‘protection’ and security. Many countries are worried that something similar would happen to their assets, which are really held by the people of those countries and not by their governments.
For a long time, Russia has kept a sizable amount of foreign currency reserves. The high level of exports and slightly lower imports show that the nation does not need to aggressively sell the currency to maintain financial stability and meet local demand. For more info on Russia’s imports and exports, we have gathered the country’s trade flows in 2022.
Over 50% of Russia’s foreign funds are now frozen in the European Union and the Group of Seven nations, making any unforeseen need to utilize them very unlikely. Instead, the Russian government will use the increased reserves to swiftly distribute cash for emergency requirements, and the Russian Ministry of Finance will keep piling on domestic Ruble debt to cover any budget shortfall.
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