Russia’s foreign exchange reserves had to be kept abroad and nothing could have been done to avoid a freeze of the country’s dollar and euro assets, the central bank said in the latest question-and-answer post on its website.
Earlier this month, nearly half of Russia’s foreign reserves – worth $300 billion – were seized as part of sanctions imposed by the US, the EU, and their allies over Moscow’s military operation in Ukraine.
Keeping gold and foreign exchange reserves in the country would have been like having no reserves at all, as such assets protect the economy against external crises, the Bank of Russia explained.
It said there were two types of financial crises: a “traditional” one, such as the world experienced in 2008, 2014, and 2020, and a geopolitical one, like the one Moscow is facing at the moment.
During a traditional crisis, reserves in US dollars and euros help the country pay its debts and keep trade going, so nothing could have been done to prevent a freeze of its assets.
“Cashless currency is always reflected in correspondent accounts in foreign banks and therefore can be frozen,” it added.
During a geopolitical crisis, Russia needs alternative assets that are immune to Western sanctions, such as gold and the Chinese yuan, the regulator noted. It has accumulated these over the past few years and they now make up almost half of its foreign reserves.