The Russian Central Bank has assured that all gold in its foreign exchange reserves is in its vaults in the country, the regulator said.
“All the gold in our foreign exchange reserves is in the vaults of the Bank of Russia on the territory of our country,” the Central Bank noted.
The Bank of Russia said that foreign exchange reserves are a tool with which the central bank can protect the economy from external crises. They ensure the repayment of foreign currency debt, stabilize the foreign exchange market and critical imports in difficult situations.
“Holding reserves domestically or spending them domestically is like having no reserves, no protection once morest external crises. This is how our country lived in 1992-1999,” the Central Bank noted.
The regulator explained that at that time the country was defenseless once morest external threats, it was almost a permanent financial crisis. “That is why the central bank seeks to accumulate reserves in times of prosperity and to shape the structure of reserves in such a way that it can respond to different types of crises,” the Central Bank of Russia stressed.
Respond to crises
The regulator explained that since 2014, it takes into account two types of possible crises in its policy: traditional financial crises, which have already occurred in the world (in 2008, 2014 and 2020) and geopolitical crises.
“To withstand a geopolitical crisis, we need reserves that cannot be affected by sanctions from Western countries. That is why the Bank of Russia has raised the share of gold and the Chinese yuan to almost half of its reserves in recent years,” the Central Bank stressed.
These types of crises, the regulator notes, require fundamentally different responses, affect the economy differently, but can be large in scale. This is why the Bank of Russia has seriously increased its reserves since 2014 and these are now much higher than those of other countries with comparable economies.
“This was done precisely because the Bank of Russia took into account the fact that in the event of a financial crisis it will not be possible to quickly use gold and the yuan – these assets are not very liquid. And if geopolitical risk materializes, opportunities to use US dollar and euro reserves will be limited, meaning sufficient reserves are needed in alternative assets,” the regulator said.
Freeze of reserves
The Central Bank also clarified that under the current sanctions regime, there is no way that part of the gold and foreign exchange reserves in dollars and euros will not be frozen.
“Currencies other than cash are still reflected in correspondent accounts of foreign banks and can therefore be frozen. But following freezing the Bank of Russia’s reserves in dollars and euros, Russia essentially applied a mirror measure. Restrictions on capital movements, a ban on the sale of securities by foreign investors and a ban on withdrawing funds from the Russian financial system have been introduced,” the regulator said.
In addition, payments of Russian corporate debt and public debt to debt holders of countries that support anti-Russian sanctions will be made only with the permission of the government commission. In other words, in response to the freezing of part of Russia’s reserves, Moscow also imposed restrictions on the movement of funds that might be transferred to unfriendly countries for a comparable amount.
Source : TASS
Avic translation for International Network
