Russia piling up forex reserves

Russia has continued to boost its foreign currency reserves, despite economic pressure due to Western sanctions. The country’s holdings reached $587.5 billion as of June 16, the Bank of Russia reported this week.

According to the regulator’s calculations, the volume of international reserves increased by $1.8 billion in the week since June 9, or 0.3%, largely due to “a positive market revaluation.”

In May, reserves decreased by 1.95%, or $11.6 billion, to $584.1 billion, after soaring past $600 billion in April. The stockpile reached a historic high of $643.2 billion on February 18, 2022, but shrank by 8.4% throughout the past year to reach $577.5 billion on January 1, 2023.

Roughly half of Russia’s forex reserves held abroad were frozen by Western central banks in March last year as part of the sanctions on Russia over the Ukraine conflict. The remaining assets consisting of gold and foreign currency, as well as Chinese yuan, are held within the country.

The EU has been mulling ways to use the frozen Russian holdings for the post-conflict reconstruction of Ukraine for months. European Commission President Ursula von der Leyen said earlier this week that she intends to submit a legal proposal on the transfer of the assets to Ukraine before the commission goes on summer break on July 25.

However, many warn that this step could create a dangerous precedent and undermine the credibility of the EU banking system, as well as the euro. Austrian Foreign Minister Alexander Schallenberg said on Tuesday that if Russian assets are confiscated and the decision is later challenged in the courts and overturned, it “would be a diplomatic and economic disaster.”

Russia has condemned the EU’s freezing of its assets and its plans to expropriate these funds as theft, and warned of retaliatory measures.

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