- The Kremlin announced plans to top up its reserves with $3.2 billion from Russian oil and gas sales.
- The funds will be used to stabilize Russia’s economy against sanctions, the Kremlin said.
- The World Bank expects Russia’s economy to contract by 11% this year due to the Ukraine war.
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Russia will top up its state reserves with 273.4 billion rubles from its oil and gas sales, the Kremlin said on Sunday.
The funds, equivalent to about $3.2 billion, will be used “to implement measures aimed at ensuring the stability of the economy in the face of external sanctions,” the Russian government said in a statement. It will fund the reserve increase through “additional oil and gas revenues in the first quarter of 2022,” the statement said.
The Russian government’s reserve fund was set up to finance unforeseen expenses and significant measures not accounted for in the state budget, the Kremlin said in a statement.
Russia is an energy powerhouse. According to the International Energy Agency, the country accounts for 45% of the European Union’s gas imports. Energy prices have skyrocketed this year on the Ukraine war and fears of trade disruptions over infrastructure damage and sanctions against Russia.
The EU is trying to move away from Russian energy — it bans Russian coal and is considering an oil embargo — but has made no mention of a natural gas ban. Germany, Europe’s largest economy, is particularly dependent on Russian gas.
The EU has paid $38 billion for Russian energy since Russia invaded Ukraine, a senior EU official said on Wednesday. This has contributed to Russia’s foreign exchange reserves, which edged up in the week ended April 1, the Central Bank of Russia announced on Thursday.
Despite far-reaching sanctions, Russia’s coffers seemed to be holding up. The country repaid its foreign debt on time until last Monday, when the US Treasury blocked the country’s dollar payments to US banks. Russia then transferred the money in rubles, which has returned to pre-war levels thanks to Russia’s tight capital controls.
Rating agency S&P Global downgraded Russia’s foreign currency payments to a “selective default” on Saturday after Moscow paid a dollar-denominated debt in rubles last week. Russia last defaulted on its external debt in 1917 during the Bolshevik Revolution.
Russia’s economy is still expected to contract by 11.2% in 2022, the World Bank said in a report released on Sunday. The country’s oil and gas revenues in March were also 38% below the March 3 forecast by the Russian Treasury, according to data released on Tuesday by the Russian Treasury.
Former chief economic adviser to Russian President Vladimir Putin recently told the BBC that Russia would end the war in Ukraine within a month or two if Western countries imposed “a real embargo on oil and gas exports from Russia.”