by Giuseppe Sarcina
The goal of reducing the ruble to waste paper has so far failed due to the strategy of central bank governor Nabiullina: But the reserves are running out and could last for a few more months provided that Russian gas revenues do not change. and oil (which the new European sanctions will focus on)
FROM OUR CORRESPONDENT
WASHINGTON The Governor of the Central Bank of Russia, Elvira Nabiullina, is seriously concerned about the impact of the sanctions. One of the most important moves by the West was to freeze about twothirds of the reserves at the bank’s disposal. That means foreign exchange and gold worth $643.2 billion.
The restriction should have prevented Vladimir Putin’s government from supporting the ruble price, thereby plunging the Russian economy into the hell of stagflation: rising prices accompanied by a sharp recession.
The latest news about the war in Ukraine
In fact, the ruble collapsed in the markets at a first stage, but in recent weeks it not only recovered, but recovered to better levels than on the eve of the attack. Here is the order of rubledollar exchange: February 23, 83.82 (dollars); March 9, the collapse to a high of 138.73; then the move to $81.12 yesterday, April 18th. The numbers are clear: the goal of reducing the Russian currency to waste paper has not been achieved, at least for the time being.
For what reason? Of course, the countermeasures taken by the bank’s governor, Elvira Nabiullina, carried weight. First, it immediately raised interest rates to 20% to make new rubledenominated government bonds more attractive. Then the big exporters, essentially the three oil giants Gazprom, Rosneft and Lukoil, were ordered to convert 80% of their foreign currency earnings into local currency.
But that’s not all. Russia still managed to move part of its currency reserves. How many? We glean the answer from the press releases that the bank itself issued for the benefit of the financial markets. So we start at $643.2 billion on February 25, 2022 and arrive at $604.4 billion on March 25.
In one month, Nabiullina put 38.8 billion in foreign exchange reserves on the table.
At the same time, the Russian government has nonstop gas and oil export revenues: they are estimated at about $40 billion, almost $1 billion a day (again, up to March 25).
Altogether, then, Putin was able to manage a vast amount of liquidity, nearly $80 billion, to fund the war and cushion the most insidious sanctions strike.
Now, however, the governor’s words make it clear that margins are rapidly declining. And here we are helped by an old graph that the Central Bank of Russia removed from the internet, but which was restored from the Statista website.
the portfolio crosssection not by currency but by the countries in which the accounts are held. The data is as of June 30, 2021. On that date, total reserves were worth $591 billion. Well, the value of gold is 21.7%, that’s $128 billion, all of which is stored in Russia. Then comes the first surprise: 13.8%, or $81.5 billion, is in Chinese banks; 12.2%, or 72.1 billion, in France; 10%, 59.1 billion, in Japan; 9.5%, 56.1 billion, in Germany; 6.6%, 39 billion, in the United States; 5.5%, 32.5 billion, in multilateral institutions such as the Monetary Fund and the Bank for International Settlements, and finally 4.5%, 26.5 billion, in the United Kingdom.
All of these numbers suggest some considerations. The United States, European Union, United Kingdom and Japan want to close all foreign central bank accounts. However, Moscow could at least always count on the Chinese piggy bank. On June 30, the equivalent of $81.5 billion was deposited there.
It is impossible at this point to determine exactly how much money there is at the moment. We can only try an estimate. it is reasonable to assume that the Russian central bank had the same share of portfolio diversification on February 25th. The Chinese share would then have been 88 billion (13.8% of 643.2 billion). Let’s also imagine that the Russians only resorted to these accounts to prop up the ruble and spent 38.8 billion. That means he still has around $50 billion at his disposal today to use cash against another currency crisis like the one at the end of February.
Therefore, Moscow might be able to keep the ruble price for a few more months. How many? It depends on how long the real economy lasts and whether or not gas and oil revenues are falling. So Nabiullina sounded the alarm.
04/19/2022 (change 04/19/2022 | 11:59 am)
© REPRODUCTION RESERVED