Russia’s $186 Billion Sovereign Wealth Fund Dumps All Dollar Assets

The comments below are an edited and abridged synopsis of an article by Tyler Durden

Following a series of corporate cyberattacks that the US blames on Russia, Russia’s National Wellbeing Fund (NWF) has decided to dump all of its dollars and dollar-denominated assets in favour of those denominated in euros and yuan, or simply buying precious metals like gold, which Russia’s central bank has increasingly favoured for its own reserves.

Russia's $186 Billion Sovereign Wealth Fund Dumps All Dollar Assets | BullionBuzz
A bar of gold and a hundred-dollar bills

Finance Minister Siluanov said the Kremlin is moving to reduce exposure to US assets as President Biden threatens more economic sanctions against Russia. This will affect $119 billion in liquid assets, but the sales will largely be executed through the Russian central bank, limiting market impact and reducing visibility on what it will be buying.

The news isn’t a complete surprise: Russia’s central bank has steadily reduced its dollar holdings over the last few years amid increasing sanctions pressure from the US and Europe.

The Russian parliament recently authorized the NWF to buy gold through the central bank. However, the central bank reports its holdings with a 6-month lag, making it impossible to determine its current holdings.

Russia’s gold holdings eclipsed its dollar reserves last year despite a halt in gold purchases. This was partly due to an increase in the value of its gold holdings, and partly due to the central bank’s continued efforts to shed dollar assets.

The NWF holds savings from Russia’s oil revenues above a cut-off price and is used to help offset shortfalls when the market falls below that level. Together with illiquid assets, its total value is $185.9 billion.

A few years ago, President Putin warned that Washington was accelerating de-dollarization with its aggressive financial sanctions, which were forcing its geopolitical adversaries to reduce their dependence on the greenback. Just last month, Russia reached a new milestone: Fewer than 50% of its exports were paid for in dollars.

After years of reducing its dependence on the dollar, Russia is about to intensify those efforts in a way that will force Washington to take notice.

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