Russia decided to remove US dollar assets from its $186 billion National Wealth Fund. This is in response to Washington’s continued imposition of sanctions on Moscow.
Removing US dollar assets means that Russia will not invest totally in non-US dollar assets such as gold, Chinese yuan, and the Euro.
Removing US Dollar Assets From The NWF
Russian Finance Minister Anton Siluanov announced the decision during the St. Petersburg International Economic Forum last Thursday.
“Like the central bank, we have decided to reduce investments of the NWF in dollar assets,” he told reporters. Instead of the greenback, Russia’s NWF will look into investments in euro, Chinese yuan, and gold assets.
The changes will start in July, which will include the investment ratio per asset. Euro investments will comprise 40% of the NWF, while the yuan will take 30% and gold at 20%.
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Other assets such as the Japanese Yen and the British Pound will take 5% each. Russia’s National Wealth Fund came around initially as support to the country’s pension system. The NWF forms parts of the gold and currency reserves that totaled an estimated $600,9 billion as of May.
Very Political Decision
Timothy Ash, senior emerging markets sovereign strategist at BlueBay Asset Manager, assessed Russia’s decision.
He described the move to abandon dollar assets as “very political” meant to send a signal to President Joe Biden. The move happens ahead of a scheduled summit between Biden and Russian President Vladimir Putin.
“The messaging is ’we don’t need the U.S., we don’t need to transact in dollars, and we are invulnerable to more U.S. sanctions,” Ash said. It also means that Russia is expecting more sanctions from the US.
In contrast to warmer tones from former President Donald Trump, Biden often criticizes Russia. In April, the US imposed new sanctions over alleged election interference and cyberattacks against US government websites.
It also sanctioned Russia over alleged human rights abuses and the annexation of Crimea. Russia denies all the allegations.
Digital Currencies Are The Future
Meanwhile, Russia’s central bank governor Elvira Nabiullina said that digital currencies are the future of financial systems. “I think it’s the future for our financial system because it correlates with this development of digital economy,” she said.
Moscow published a consultation paper on a digital ruble in October. In addition, the country hopes to release a prototype digital currency by the end of 2021. Consequently, pilots and trials could start next year, she said.
Consequently, the digital currency movement is something that might concern the US. Former U.S. Treasury official, Michael Greenwald said that “What alarms me is if Russia, China, and Iran each create central bank digital currencies to operate outside of the dollar and other countries followed them.”
Watch the Money Talks video reporting that Russia will remove dollar assets from sovereign wealth fund:
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