Page 16 - bne_July 2021_20210602

16 I Companies & Markets bne July 2021
Structure of Russian central bank assets, $ bn
parameters, the share of dollars in the Russian central bank's international assets already appears low vs. around 60% in Russian exports, 40% in Russian imports, 60% in Russian foreign debt, 45-65% in Russian international private assets, and 60% in global international reserves,” Dolgin added.
The CBR has also been running down its exposure to the dollar in its wider gross international reserves (GIR) and sold off over $100bn worth of US T-bills last year. At the same time, Russia has been pushing its trade partners to settle trade deals in national currencies rather than dollars, which is the usual currency of choice to settle payments in international trade.
After the change, the fund’s assets will be held 40% in euros, 30% in yuan, 20% in gold and 5% each in yen and pounds, Siluanov said as cited by Bloomberg.
The central bank reports the currency distribution of its reserves with a six-month lag, refusing to provide information on its current holdings.
When it was set up the NWF held only dollars, euros and pounds sterling, but more recently yuan, Chinese government bonds and gold were added to the mix last April. Then in February this year the Japanese yen was also added to the basket. At the time of the last report of the composition of the fund yen was 5% and the yuan was 15%. The share of dollar and euro assets in the NWF was reduced from 45 to 35% to make room for the new currencies, but the level of investments in sterling was left unchanged.
In 2018, President Vladimir Putin supported a plan to de-dollarise the Russian economy, developed by the government in response to tougher US sanctions (in particular, the blocking of assets of Oleg Deripaska's Rusal and Viktor Vekselberg's Renova).
In 2014–2019, the share of the dollar in trade and financial flows of Russia fell by an average of 15–20 percentage points, ING bank wrote as cited by RBC, including up to 49% in
the export of goods and services, 25% in imports, 37% in external debt, etc.
FX structure of daily FX market turnover in Russia
Source: Bank of Russia, ING
change is little more than an accounting change, with the CBR increasing the number of dollars counted as the central bank’s hard currency reserves while the MinFin reduces the share of dollars counted in the NWF.
“The de-dollarisation is unlikely to involve any open market transactions. With the NWF essentially being an FX deposit with the central bank, the entire deal can be covered by the central bank's international reserves, which are larger and more diversified than the NWF's. In order to reach the targeted FX structure, the Ministry of Finance has to sell $40bn and GBP4bn, exchanging them for $23bn equivalent of gold, $18bn equivalent of CNY and $5bn equivalent of euros. As of the end of 3Q20 (latest available disclosure date) the Central Bank of Russia had €143bn, $71bn equivalent of CNY and $137bn equivalent of gold,” Dmitry Dolgin, chief economist, Russia, at ING, said in a note.
“We do not believe that MinFin's move to ditch the dollar (apparently done in order to reduce exposure to foreign policy risks) will necessarily trigger de-dollarisation of
“The de-dollarisation is unlikely
to involve any open market transactions. With the NWF essentially being an FX deposit with the central bank, the entire deal can be covered by the central bank's international reserves”
CBR reserves (which would require external open market transaction). As of the latest available disclosure date, the CBR had $127bn in USD, or 22% of the total. First, according to international agreements, central banks are less exposed to sanction risks than governments, lowering the urgency
to fully de-dollarise. Second, compared to other macro
www.bne.eu
Source: Bank of Russia, ING