Russia in 2022 wants to buy the currency of “friendly countries” for $ 70 billion
The Russian authorities are assessing the possibility of buying yuan and other currencies of “friendly countries” in the amount of $ 70 billion in 2022 in order to slow down the growth of the ruble, writes Bloomberg. Ultimately, the country’s yuan reserves reach $180 billion, the agency said.
Moscow’s actions entail that it has not yet launched a long-term sale of its holdings of Chinese currency, as well as the abandonment of the previous course of Russian economic policy, according to Bloomberg. However, that idea with the purchase of currency is just one of the many [экономических] suggestions”.
The idea itself was voiced at a non-public meeting and received by the Central Bank of Russia, including Elvira Nabiullina, on August 30, agency sources say. The initiative received initial support from the Central Bank, Bloomberg interlocutors say.
These kinds of proposals have been passed around that the decision has significantly changed the economic situation of Russia’s users, especially due to the freezing of its foreign exchange reserves of 640 billion US dollars due to the conflict in Ukraine. For years, Moscow kept its holdings in euros and dollars to “protect against ups and downs in oil prices“, the article says.
In the presentation of initiatives for the purchase of “friendly offers”, the main attention is the following: “In the new situation, the accumulation of liquid foreign exchange reserves for the expected crises is extremely difficult and inappropriate. The frozen $300 billion did not help Russia; On the contrary, they have become a symbol of missed opportunities.”, writes the agency.
As Bloomberg funds, are such language “rare occurrence of a sudden onset».
Currency risks
However, things are not so simple with the ideas of buying “friendly currencies”, it is useful in the publication. For example, the sale of yuan assets “consumes separate factions with China, which will be very difficult to obtain in terms of politics.”
Also, currencies like the UAE dirham cannot be said to be politically stable because the norms of Arab countries change their interrogators. As for the Turkish lira, it faced serious risks of devaluation, the agency reports.
Now banks, the statement in the presentation, are “overflowing with” soft ” [неконвертируемыми] currencies, because … Russia’s trading partners are not happy with accepting payments in their currencies.
For the first time, the idea of purchasing “friendly” currencies (as a measure to slow the growth of the ruble) was voiced at the beginning, but then Economy Minister Maxim Reshetnikov criticized this idea, recalled Bloomberg. According to the minister, such measures will not be enough to significantly change the exchange rate of the ruble, the government will lead to a sharp reduction in spending.
By the start of hostilities in Ukraine, Russia had increased its investment in yuan as part of a policy of abandoning the dollar and the euro, becoming “one of the main holders of Chinese currency reserves in the world.” At the same time, despite the fact that these assets were not frozen, Moscow’s access to them is limited, the agency writes.
Russian yuan holdings are providing $180 billion to be spent over the next three to five years, according to the sponsors of the initiatives, to help close excess spending on foreign technology replacements and the transfer of transport statistics to new markets in Asia. The document contains information that such measures will strengthen the ruble and may offset cases of investment spending.
- Chairman of the Accounts Chamber Alexei Kudrin said on June 5, 2021 that he considers the yuan of an alternative economy to the dollar important for storing reserves in the National Welfare Fund (NWF). Kremlin spokesman Dmitry Peskov said a couple of days earlier that the process of de-dollarization in Russia had taken on a permanent character of balances with other countries.