Western sanctions imposed on Russia, following its invasion of Ukraine, showed that the accumulation of foreign assets outside the country is “risky”, which, with the current Russian war, may reshape the political and economic geography of the world, according to the newspaper. The Wall Street Journal American.
The newspaper notes in a report, Friday, that the sanctions showed that the currency reserves accumulated by the central banks of countries abroad can be “plundered” at any moment.
After Moscow attacked its neighbor Kyiv, the West froze $630 billion of the Central Bank of Russia’s reserves, the currency reserves the bank held abroad.
With the exception of gold, which constitutes only 13 percent of the reserves in the world, the reserves of foreign currency abroad are controlled by another person, according to the newspaper’s expression, and he may decide at a moment that it is not worth anything, as is happening now with the sanctions imposed on Russia.
The newspaper says that this became clear in the case of Iran, as the sanctions on Tehran showed that Washington can take measures and impose sanctions on these Iranian reserves abroad.
The West froze Russia’s foreign exchange reserves, but it did not prevent the flow of dollars and euros to the country due to its failure to ban Russian gas and oil exports, and Russia’s income from that is estimated at about $20 billion per month.
Banning major Russian banks such as Sberbank from using the dollar and excluding others from the Swift messaging system is plunging the Russian economy into chaos.
Although the dollar continues to flow into Russia, due to the exemption of the energy sector from sanctions, its value as a global store of value remains threatened by erosion due to the ban on major exports to Russia and the boycott of major technology companies such as “Apple” to Russia, according to the newspaper.
The newspaper explains in its report that if foreign currency balances have become just numbers in a computer that has no value and does not guarantee Russia the purchase of basic materials, it is logical that Moscow will stop collecting them, and start storing its wealth in oil barrels instead of selling it to the West.
Faced with this situation, Russia, the newspaper says, may transfer its money to gold and Chinese assets. However, the newspaper adds that even the Chinese currency, the renminbi, is always threatened by political considerations, unlike the dollar.
China itself has currency reserves of $3.3 trillion. And unlike Russia, it cannot usefully hold it in renminbi, which is the currency it prints.
The newspaper concludes that in front of this situation, investors may return to buy gold, and it is certain that many central banks will turn to that.
Western countries imposed a series of sanctions on Russia aimed at crippling its banking sector and national currency, after it launched a military attack on Ukraine.
The sanctions, in particular, stipulated the exclusion of many Russian banks from the SWIFT system, which plays a central role as it facilitates transfers between international banks. This measure is thus described as an “atomic weapon” on the financial front.
The sanctions affected Russia’s wealthy, including the influential and close to Russian President Vladimir Putin, and those known as “the oligarchs”, a word that refers to a group of wealthy Russians who emerged after the fall of the Soviet Union in 1991.
And the White House said in a statement, Thursday, that the US administration will work with allies and partners to ensure the confiscation of property within the scope of their powers, which may represent their yachts, luxury apartments, money, and any “unlawful spoils.”