Russia would retaliate to the seizure of money from Russian citizens and enterprises overseas by seizing funds from foreigners and foreign firms in Russia, Dmitry Medvedev, deputy head of the security council, said on Saturday, according to RIA news agency.
According to Medvedev, Moscow does not rule out nationalizing the assets of enterprises registered in the United States, the European Union, and other “unfriendly jurisdictions.”
Since the implementation of Western sanctions following Moscow’s annexation of Crimea in 2014, Russia has gradually reduced its dollar holdings, attempting to largely disconnect from the Western financial system.
According to Tim Ash of BlueBay Asset Management, the action was intended to send a signal ahead of a June 16 summit between President Vladimir Putin and his US counterpart Joe Biden.
“We have decided, like the central bank, to reduce the NWF’s investments in dollar assets,” Finance Minister Anton Siluanov said at the St Petersburg International Economic Forum.
Following the adjustments, which are expected to be completed within a month, the fund will store 40% of its assets in euros, 30% in yuan, and 20% in gold. According to Siluanov, the Japanese yen and the British pound will each account for 5% of the total.
The dollar’s stake will fall from 35% to 50%, while the pound’s part will be cut in half. For the first time, gold will be added to the NWF.
“The rest of the world has sharply reduced the dollar share of FX reserves over the last two decades, but Russia has a special interest in doing so quickly and undermining global confidence in the dollar because it is a petro-state and a strategic rival of the US,” Matt Gertken, a geopolitical strategist at BCA Research in Montreal, said in an email exchange.
“However, it is improbable that Russia will completely purge its banking system of all dollars, as this would be a poor business decision.”
The rouble strengthened slightly as a result of the news, while First Deputy Prime Minister Andrei Belousov stated that he did not expect the adjustment to alter the currency rate.
As of May 1, Russia’s NWF, which collects oil money and was originally intended to sustain the pension system, stood at $185.9 billion. It is part of Russia’s gold and foreign exchange reserves, which stood at $600.9 billion on May 27.
Russia’s central bank reduced its holdings of US Treasuries in 2018 and reduced the dollar’s proportion of its gold and forex reserves in 2020 to 21.2 percent as of Jan. 1, down from 24.5 percent the previous year. The central bank publishes that information six months later.
