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Russia’s Cash War Chest: Limited Access to US$ 630bn in Foreign Currency & Gold

Russian Gold and Currency Reserves Have Increased by 67% since 2016

Because of the Russian invasion of Ukraine two major financial sanctions have been discussed and taken:
1) Banning (selected) Russian banks from SWIFT
2) Freezing Russian central bank currency reserves
The first makes Russian payments with international counterparties much harder. This will be enhanced further by harsh measures against the Russian central bank.
Foreign currency reserves of the Russian Central Banks summed up to US$ 630bn per end of January 2022, of which US$ 132bn were in Gold. They increased by 67% in the last 5 years.
In addition, the Russia State owns The Russian National Wealth Fund with US$ 198bn of assets under management per November 2021.
The effectiveness of any freeze will strongly depend on the locations of assets. For a regional breakdown by countries see HERE.
Right now, the Russian Central Bank apparently has only limited access to its reserves.

Russian Reserves Are Relatively High Compared to Other Countries

Total Russian currency reserves equal 42.5% of GDP, which marks a top value among major countries in relative terms.
The corresponding value for Germany is 7.4% of GDP based on US$ 294bn of total currency reserves. For the US the ratio is as low as 1.2%. Both countries, however, own domestic „reserve currencies” anyway, namely the Euro and the US Dollar.

But even if we look at Brazil, India or China, the other three letters of the „BRIC“-states, figures are  only from 23% to 25% of GDP.

So, by international standards, Russia’s gold and foreign exchange reserves are quite large. At the same time, this reflects  that Russia’s economic performance, expressed in terms of GDP, is actually very low.

Measured in absolute terms, a completely different picture emerges. China (US$ 3.4 trillion) leads by a wide margin, ahead of Japan (US$1.4 trillion) and Switzerland (US$ 1.1 trillion).

Russia Owns a Lot of Gold

Russia also holds a relatively high share of gold as part of its foreign currency reserves totalling US$ 129bn. Per September 2021 this was the 5th largest of any country globally.

Russian Gold in % of GDP Is Highest of All Major Countries

Russian gold holdings equal 8.7% of GDP 2020, which is the highest ratio of all major countries.

You Can’t Eat Gold, And You Can Hardly Pay With it Either

It might be difficult to freeze Russian gold assets, as Russia is likely to hoard most of its gold in its own country. One could eat with golden forks from golden plates. However, you cannot eat your gold , even in war nor can it generally be used to pay for food etc. First, you have to convert the gold into foreign (hard) currency. And whether that is possible, let alone whether one can then pay with it, depends in turn to a large extent on how effective the sanctions measures imposed on the Russian banking system are. And as it looks right now, these constraints, particularly the ban on transactions with the Central Bank seem to be quite effective.

So gold alone as a „war chest“ is probably not enough.