Page 24 - RusRPTAug22

The overall aim of the budget rule was to limit volatility in an economy heavily dependent on a dollar-denominated commodity whose price could shift rapidly.
Whereas previously the Finance Ministry and Central Bank largely accumulated reserves in dollars and euros, now they will be held in the currencies of “friendly countries”. The yuan has been introduced to the currency basket in recent years and currently Russia holds more yuan as part of its currency basket than any other country in the world.
More recently, the Central Bank of Russia (CBR) says that it will also start collecting the United Arab Emirates (UAE) dinar and introduce dinar trading on the Moscow Currency Exchange. Wealthy Russians have invested heavily in the UAE, which has become something of a non-sanctioned playground for Russia’s rich.
India has also started to pay for some Russian oil imports in dinar, as part of Moscow’s efforts to finance its international oil trade in currencies other than the dollar.
But even in the context of sanctions, and with trade reorienting from Europe to Asia, the Finance Ministry cannot simply de-dollarize the economy and will not find it easy to accumulate large reserves in other currencies.
“No decision on the budget rule has yet been made. It is telling that the Ministry of Finance does not propose to introduce the rule before 2025, and that its thinking on macroeconomic policy has not shifted more in response to the new conditions,” FPRI BMB Ukraine said in a note. “The budget rule proposal suggests that the approach of many of the economic bloc appears to be to muddle through, adapting existing policies to new realities—what Andrei Belousov in early June called a “situational response”. This is partly a rational response to the contingencies of war, but it is likely to become increasingly difficult to sustain.”
24 RUSSIA Country Report October 2020 www.intellinews.com