Russia intends to buy $70 billion (about 4.4 trillion rubles) in “friendly” currencies, Bloomberg reported, citing a draft Russian government document that has not been officially released.
According to preliminary information, currency purchases will be mostly in Chinese yuan.
As noted by the agency, this plan received support on August 30 at a special meeting with the participation of high-ranking officials from the government and the Central Bank of Russia, including the head of the financial regulator Elvira Nabiulina.
For many years, the Russian Central Bank has been hoarding hundreds of billions of dollars, euros and other foreign currencies as an “air cushion” to protect the economy from fluctuations in oil prices, the publication said.
However, “in the new situation, it is quite difficult and inexpedient to accumulate large liquid currency reserves as a precaution in case of future crises. The “frozen” (by the Western countries) 300 billion dollars did not help Russia – on the contrary, they became a vulnerability and a symbol of missed opportunities,” Bloomberg quoted a presentation prepared for the meeting as saying.
At the same time, the materials of the conference in question note that the purchase of currencies even of “friendly” countries is problematic. Specifically, the sale of financial assets in yuan “will require a separate agreement with China, which will be very difficult to achieve in the context of the crisis.”
Other currencies, such as the UAE dirham, are subject to “high political risk” as governments change their policies. And the Turkish lira, in turn, is subject to serious risks of devaluation.
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In fact, the purpose of the said financial operation is to “rein” the rapid rise of the ruble exchange rate.
Natalia Lavrova, chief economist at BCS Financial Group in Moscow, commented that purchases of $70 billion in “friendly” currencies could push the ruble to 75-80 rubles to the dollar, from current levels of around 60 rubles to the dollar.
“Currency purchases will help Russia limit the unprecedented strength of the ruble’s real exchange rate, which hurts exporters and budget revenues. For neutral countries, these currency purchases would provide some support for local currencies and help finance imports.” of goods,” believes Russian economist Alexander Isakov.
The document cited above also states that Russia’s foreign exchange reserves in yuan in 2022 could reach $180 billion. Russia’s central bank stopped publishing detailed information on the country’s gold and foreign exchange reserves after the sanctions were imposed – but as of January 1, yuan reserves were then 17%, or just over $100 billion.
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