Are Russian Foreign Reserves Frozen?

Despite Western sanctions, 35.5% of Russia's reserves has remained accessible in the country or in China, according to data compiled by Anadolu Agency. Western nations have frozen access to approximately half of the Russian central bank's reserves. The Russian central bank reserves stood at $643 billion as of Feb. 18. While 21.7% of the reserves are in Russia as gold, 13.8% are being held in China. Around 12.2% of Russia’s foreign exchange reserves are in France and 10% in Japan, while 9.5% are held in Germany and 6.6% in the US. 

Another 5% of the reserves are in various intergovernmental organizations and 4.5% in the UK. Austria holds 3% of the reserves, with 2.8% in Canada and the remaining 10.7% in undisclosed countries.

After Russia’s annexation of Crimea in 2014, Moscow stepped up measures to make less use of US dollars in order to protect itself from risks in economic and global trade. The share of US dollars in Russia's foreign exchange reserves fell to 16.4% in the first half of 2021, from 22.2% in the same period in the previous year, according to Russian central bank figures. Last July the Russian Finance Ministry announced that the share of US dollars in the country's national wealth fund had been reduced to zero.

The US and its allies agreed to remove certain Russian banks from the Society for Worldwide Interbank Financial Telecommunication, known as SWIFT, a global financial transactions and payments system used between banks worldwide. Russia’s central bank introduced the System for Transfer of Financial Messages, SPFS, an alternative financial transfer system against the possibility of getting excluded from the international SWIFT system. This is only popular within Russia.

What lessons can we learn?

Just as Russia, it is prudent to have Malaysia’s reserves in other currencies beyond the USD. It is also prudent to maintain such reserves in different financial markets. And, hopefully, we may not have problems like Russia. The era of the USD as the world’s reserve currency may end with emergence of other countries and currencies.

Reference:

Around 35% of Russia’s accessible reserves in country, China, Emre Gurkan Abay, 1 March 2022 (https://www.aa.com.tr )