On June 3, the Russian Finance Ministry unexpectedly announced that from May 20, 2021, the government’s foreign exchange reserves will have a new regulatory structure. The US dollar was completely excluded from the NWF liquid assets, the proportions of the other four currencies were changed, and gold was added to the reserves in anonymized form. More specifically, the share of the dollar in the accounts of the NWF with the Central Bank has been reduced from 35% to 0%, and the pound sterling – from 10% to 5%. The shares of the euro and the Chinese yuan, on the contrary, increased from 35% to 40% and from 15% to 30%, respectively, the share of the Japanese yen remained at 5%. In addition, gold was added to the NWF’s liquid assets with a 20% share (see chart).
The changes were carried out in accordance with the government decree of May 21 this year. In an official statement, the Ministry of Finance explained that they are aimed “at ensuring the safety of NWF funds in the context of macroeconomic and geopolitical trends of recent years and decisions aimed at” de-dollarization “of the Russian economy.” The department explained the appearance of impersonal gold in the reserves of the NWF with a desire to protect them from inflationary risks. The yuan and the euro were chosen as a substitute for the dollar because they are the currencies of the countries with which Russia trades most actively. It should be noted that according to the statistics of the Federal Customs Service, the top three foreign economic partners of the Russian Federation in terms of the amount of trade turnover are indeed China, Germany and the Netherlands – however, it is known that a considerable part of settlements when trading with them is still conducted in dollars.
The head of the financial department, Anton Siluanov, said at the SPIEF on Thursday that the structure of the NWF’s investments will be brought to new proportions “rather quickly, within a month.” First Deputy Prime Minister Andrei Belousov explained that the decision to withdraw from the dollar in reserves “is connected, among other things, with the threats of sanctions that we have received and accepted from the American leadership.” Anton Siluanov also admitted that this step was taken in order to secure the investments of the NWF “from various political consequences.” The head of the Central Bank Elvira Nabiullina on Thursday promised to take into account the government’s decision to exclude the dollar from the NWF assets in the process of managing international reserves. As of May 1, the volume of the NWF amounted to $ 186 billion, liquid assets (in the form of funds in accounts) – $ 116 billion. The volume of Russia’s total gold and foreign exchange reserves as of May 21 was a record $ 601 billion.