Has the West Just Robbed Russia of Hundreds of Billions of Its Foreign Reserves?

"39% of the [$630bn] reserves are held in countries that have imposed sanctions"

Editor’s note: No wonder Putin has elevated nuke readiness. This is WW3 by means of robbery.

So much has happened over the past 48 hours that your humble Moscow correspondent has struggled to type a single sentence.

Well, we have to start somewhere. So let’s start with the unprecedented sanctions that could potentially trigger a global economic meltdown.

On Sunday, the European Union, the United States, Great Britain and Canada jointly announced they would freeze the reserves of the Bank of Russia. So what? All of Russia’s delicious foreign reserves are safe and sound in an underground vault in Moscow, right? Wrong.

The Bank of Russia’s mountain of reserves was allegedly supposed to protect from western financial trickery. Except… how does that work if you keep a huge portion of these assets in foreign securities or in banks that are vulnerable to sanctions? And that’s exactly what Russia’s central bank did. And now we have a problem.

This is not good:

As of February 1, the Central Bank of the Russian Federation had $630.2 billion in reserves, including $113.5 billion from the liquid part of the National Welfare Fund.

Almost half of the gross reserves ($311.2 billion) are placed in foreign securities, a quarter ($151.9 billion) – on deposits with foreign commercial and central banks. 132.2 billion dollars of gross reserves (21%) are gold, which is located mainly in the vaults of the Central Bank within Russia.

Freezing reserves in a large economy like Russia is unprecedented and will have a “devastating effect,” says Tim Ash, strategist at Bluebay Asset Management: “We could see the ruble collapse.”

39% of the reserves are held in countries that have imposed sanctions [on the central bank]. However, if Japan and the IMF join the freeze, then 56% of the gross reserves will be under the “blockade”.

The outlook here is not exactly rosy:

“Sanctions against the Bank of Russia could have a huge effect on the Russian economy and banking system similar to what we saw in 1991,” warns Elena Rybakova, deputy chief economist at the Institute of International Finance. “This could lead to a run on depositors and dollarization, a sharp fall [of the ruble], depletion of reserves—and possibly the complete collapse of the Russian financial system.”

Another Russian media report gives a similar economic forecast:

Most likely, about 70%, if not 75% of the assets of the Central Bank will be blocked. This means that the Central Bank will no longer support the ruble. He will not have significant opportunities for this,” HSE Professor Evgeny Kogan told the bfm.ru radio station.

So far, we are only talking about freezing part of our reserves, and if the situation normalizes, the money will be returned to us, however, the corridor for maneuvering to regulate the ruble exchange rate has become much narrower, Vasily Solodkov, director of the Banking Institute of the Higher School of Economics, told NG. “If the reserves are frozen, there will be physically nothing to support the ruble,” he says.

Russia’s state-run RIA Novosti described the foreign reserves freeze as a “robbery” and warned of economic chaos on a global scale:

Again, things are quite precarious:

This is actually an attempt, this is theft, in fact, someone else’s property is being snatched away,” Anatoly Aksakov, head of the State Duma committee on the financial market, assessed what is happening now with Russian reserves.

Analysts state that such extreme financial sanctions will hit not only the Russian financial system, but throughout the world. The freezing of transactions means that the work of any counterparties in the European Union, as well as the United States and Canada, will be suspended. The Bank of Russia will not be able to buy and sell foreign currency, and this will deprive European and American partners of the opportunity to pay for Russian [energy!!] exports.

What now?

The Bank of Russia has resumed gold purchases. As readers of this blog know, Russia’s central bank stopped gobbling up gold in April 2020.

Meanwhile, Russia’s finance ministry has instructed exporters to sell 80% of their foreign exchange earnings.

The central bank announced earlier today that the key rate has been raised to 20%:

External conditions for the Russian economy have changed dramatically. An increase in the key rate will make it possible to ensure an increase in deposit rates to the levels necessary to compensate for the increased devaluation and inflation risks. This will help maintain financial and price stability and protect citizens’ savings from depreciation.

It’s too soon to say whether we are witnessing a temporary market panic or something truly catastrophic. It’s 2022. Anything is possible. Never forget that.

If negotiations between Ukraine and Russia—which are being held as we type these words—are successful, will these sanctions remain in place?

And what’s the deal with the SWIFT restrictions? And is it true that your humble Moscow correspondent rushed to an ATM last night to try to withdraw cash from his US bank account, and was extremely denied?

There’s really just too much going on. The takeaway here is…. Russia’s central bank reserves: maybe not as “reserved” as we were led to believe? Strange times.

Whatever happens, there’s always the digital ruble—right?

Stay safe everyone. More soon.

Source: Edward Slavsquat

  1. Ilya G Poimandres says

    But if they do that, where does gold go? #actualHedging

  2. Adam says

    Well why has Russia kept its money in its enemies jurisdiction. I always say the problem with Russia is, its psychologically defeated by the west, right from the ordinary Russian on the streets to the Oligarchs and political leaders. Their self validation is invested in being white and European, so all the want is to be accepted by the people they perceive as the develop white people. So like battered abuse wives, they still continue claiming but I love him, its just pathetic.

    Why did Russia agree to do the space station and to exclude China, its the same thing, they think if they bend over backwards for the west they would be accepted and invited to the rightful place as a great white nation. its like they are completely illiterate and psychologically dominated.

    Hundreds of Russian Oligarchs have got their visa’s revoked and their assets and money confiscated and yet hundreds of Russian Oligarchs, elites and politicians continue to repeat the same mistake. They have no self respect or self worth or knowledge of history.

    Why don’t they put their money into development of the vastness of Russia, built news cities with universities at their centre. Invest in young Russians to exploit the knowledge base of Russia. Millions of students would come from the south to create a dynamic society. But if you look at how Russia operates, its like illiterate people with no concept of how the world works.

    There are no big China towns, Indian communities, African communities or any other dynamic communities from southern countries. Because Russia acts like the western countries, we don’t immigration or other ethnicities here, we don’t want to be like western Europe, we are the last hope for whiteness. well you can’t create meaningful relations ships with other countries if you don’t have dynamic communities of people from those countries in your country. That is why it looks like Russia is isolated.

    1. Geraldo says

      This is an excellent assessment. It is something I have long noticed, sadly, even in Putin who either doesn’t do things he should do because he doesn’t want to upset the Americans (who gives a toss about the British) or does things he thinks will appease them in the hope of favour or respect. It is such a naiveté to ever trust the Americans, ever. The whole idea of negotiating for a treaty was meaningless (we assume purposely) because any agreement with them is pointless, they will not abide by it when its suits them.
      Russia seems to have an inferiority complex when it sure as hell shouldn’t. They’ve been told for so long and so many times by the west that they are the dreaded moscals, the Asiatic horde or even worse the Slav (which is only one step up from the black man in terms of killing with impunity.) The US understands strength and getting a good kicking, it will negotiate with an AK shoved up its nose yes. But as you mention I think this co-dependent spousal abuse relationship works both ways, the West hates it when Russia thumbs its nose and runs off with Xi, they hate it, Russia is ‘our bitch’ she can’t run away, we’re not going to accept it, you must come back and be locked in the house by the jealous genocidal maniac. Its rather sweet but for 100 years the Russians have been the enemy du jour and they are loved for it, they can’t accept that Russia is no longer there to be picked on at a whim or blamed for their own miscalculations and stupidities (Trump, Clinton et al)
      Russian culture is by far superior than the US shallow, plastic and rather amoral empty offerings, Russians much nicer and polite, better educated than Americans, one has to ask why a superior people with a superior culture and REAL history feels the need to pander to US empty headed corrupt nonsense and BS. Russia IS different but in a good way so be proud of it and stop acting like a stood up prom queen. Lets hope that taming the Nazi cancer at the heart of the Ukraine is the end to this nonsense.

      1. Serozha says

        Hear, hear to both Adam & Geraldo! I have been saying the same thing for years. Although I am unfortunately American, I have lived & worked in Russia, have a graduate degree in Russian Studies & the love of my life was Russian. It’s always made me cringe at how Russia grovels to the West, practically begging it to “let us join the club, please!!” The analogy with domestic violence is apt. No matter how much they abuse & malign Russia, it always comes back begging for more. They learned nothing from the 1990s when the US invaded Russia, using its puppet Yeltsin to rape & pillage Russia in concert with Russian oligarchs. Where do the Russian oligarchs go? London. I’ve always found it pathetic when Putin refers to “our partners” when speaking about Washington & other NATO powers. They despise Putin & Russia and will never accept them as equals even though, as the commenters note, Russia’s culture is far superior to the West’s, especially to America which is vulgar, utterly materialistic, egomaniacal & celebrates ignorance. As the old saying goes, “fool me once, shame on you; fool me twice, shame on me.”

        1. nnn says

          Putin is a holop

    2. Analyst says

      This is standard practice for trade with any country. As mentioned in prior comment, you cannot confiscate these reserves without risking similar loss

    3. guest says

      >>>>”China towns, Indian communities, African”
      If they turn their country into a slop-bucket why bother with anything ?

      1. Drapetomaniac says

        Think of Detroit – world class city 1950s – 1960s, population 1.8 million, after several decades of minority governance, a typical loser city with a loser population of 670,000.

        Third world countries are that way for a particular reason: civilization is contrary to man’s nature and abstract logical thinking is almost completely alien to it.

        1. les online says

          Repressive civilisation is contrary to man’s nature. The dominance of abstract logical thinking* is a repressive mechanism. (*left hemisphere dominance ?)

        2. guest says

          In Ukraine people line up and wait for rations. In nigger-land, like California, there would have been riot and looting 2-3 days ago.

          1. rocky says

            We don’t want your nasty tongue in our world

    4. nnn says

      Putin is Eltzin No2

  3. Analyst says

    Article is not correct, whatever reserves Russia holds outside the country, foreigners hold more within Russia. West can deny access to these reserves temporarily but if they confiscate, Russia can do likewise with foreign assets within Russia

  4. ken says

    Wasn’t there an article a few months back about gold being shipped out of Russia?

    Whatever became of that?

  5. jim says

    No matter what they do the useless Putin refuses to retaliate. Get him out of office and replace Putin with a MAN that WILL fight back every time gringo causes another provocation. Why won’t this stupid MF hit them back with some nukes to england and yanky-Stain? Maybe some counter sanctions if hes too scared to bomb them. Putin PROMISED to target the leadership and the actual command centres of this. And what do we see now??? NOTHING. Like this idiot always says. What a useless turd Putin is. All the best weapons and he REFUSES outright to use them to destroy city of london. USELESS BAZ-TURD is the poohtin. Pooh in a tin. What a stink. Hope the Russians depose him soon and replace him with someone that WILL retaliate.

    1. Hungary Guy says

      Look up Russian Nuclear Doctrine.
      Putin can’t just order “retaliate” bc of Cargo Planes full of arms landing in Romania, Poland 0- 24.
      Whereas, Russian Territorial Integrity or Russian State’s Existence ar TRULY in Jeopardy bc of Sanctions.
      If I were him, I would have ordered a Nuke Strike in 2015, when Erdogan Sultan shot one Russian Plane.
      But then- quite poissbly, we wouldn’t be having this discourse, now…

    2. nnn says

      Putin was right hand of Eltzin and Eltzin was a CIA man, so think

  6. guest says

    Forgive me for questions on Monday morning, but the 5D Grand-Chess planners in Moscow left their war-chest in NATO banks ?!!

    Haven’t they read the story of the last Tsar of Russia & his gold reserves in Allied banks ?

  7. Serozha says

    One correction here: Russian banks that process energy transaction were exempted from the sanctions – such as Gazprombank – because of Germany’s heavy reliance on Russian gas. Germany only agreed with the sanctions after these exceptions were made; the EU requires unanimity so they had to make the concession for Germany.

  8. Ulrich von Kafkanien says

    One possible solution is perhaps to start accepting payment for gas to Germany et al in gold.


    1. SteveK9 says

      Require payment in rubles … that is how you protect the currency. The value of the ruble would rise dramatically.

  9. defender says

    we need to release the WMD and take back everything, take london and paris jew enclave. release the Putin on his Bear.

  10. Abóbora says

    Has anyone considered that maybe all of this is deliberately staged for the purpose of crashing the world economy so they can force us into the WEF’s digital prison in which we’ll “own nothing and be happy”? What better way to force recalcitrant populations into complete submission to and reliance on the state than by destroying the economy under the guise of war, especially when 99% of the West have totally fallen for it because the media have been painting Putin as a psychopath for years.

  11. Roy Lester David says

    This is a real casus belli moment for a nuclear solution.

  12. SteveK9 says

    One of Russia’s worst enemies is its Central Bank and the Economists in charge of finance. High interest rates that have strangled Russia for a decade. Refusal to run a deficit. A fixation on acquiring foreign reserves (see how that is working?). They are frankly stupid, and this is one area where Putin seems to lack any expertise.

    1. Islander says

      The Russian central bank belongs to the Rothschild banking cartel and it’s not about to change.

  13. nnn says

    Stupid Putin playing soft and nice

  14. John Charlton says

    PUTIN must be stopped. He wants to recreate the old 20th century Russian empire. So ANTI-EMPIRE should be totally against the tyrant Vladimir Putin. I hope he hangs.

  15. GMC says

    I’ll trade you my gold for not nuking your country – is where i would start the negotiations. And then I would silently sink a few ships and knock a few airplanes out of the sky.Most countries that will use this financial type of War need to be shown that they can’t hide behind a sanction and think there will be No consequences. Put a Russian army sargeant in charge of this – not a Moscow suit guy that is friends with the Jewish Financial Cartels. Screw – being nice about it.

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