Russia’s Foreign Currency Reserves Declined a Lot!

👉 Russian Central Bank resumes weekly publication of foreign currency reserves

👉 Record drop in Russia’s foreign reserves within the first two weeks of the war

👉 Foreign reserves developed as expected after sanctions were imposed

Russian Foreign Currency Reserves Declined by US$37bn or 5.5% Since the Beginning of the War

In response to the Russian invasion of Ukraine, the international community dropped economic sanctions of a historic scale, including the so-called freezing of the Russian Central Bank’s foreign currency reserves.

After the Russian Central Bank resumed its weekly publication at the beginning of April, it is now possible to examine which impact the invasion of Ukraine and the sanctions on Russian currency reserves had. We have therefore updated our previous research accordingly. 

On Feb. 18, 2022, the last week before the Russian invasion, foreign currency reserves stood at US$643Bn. Currently, as of Apr. 01, 2022, they are only US$607Bn. Thus, Russian foreign currency reserves have declined by US$37Bn since the beginning of the war, having previously more than doubled since March 2015 and increased almost continuously. 

Strongest 6-Week Decline Since the Financial Crisis 

We took a look at six-weekly changes (the period since the war began) in foreign currency reserves. The invasion of Ukraine is causing the biggest drop in Russia’s reserves since the financial crisis 2008. Even the annexation of Crimea only led to a comparatively smaller reduction in foreign reserves.

Significant Decline in Foreign Reserves at the Beginning of the War, „normal“ Development Under Sanctions

The sharp decline in foreign currency reserves between 02/18/2022, and 03/04/22 is particularly striking. Western countries sanctioned the Bank of Russia on Feb. 28, 2022. The central bank used this short period of time to reduce its foreign currency reserves by US$ 36,70 billion. The reserves developed within a broadly normal range, after the financial sanctions have been imposed. 

Russian Central Bank Resumes Gold Purchases

Due to the restrictions imposed by the Russian Government on purchases of foreign currency, private households in Russia increasingly demanded gold. The state met the increased demand by abolishing the VAT on gold bars. As a consequence, the Bank of Russia suspended its gold purchases for a short period. On March 28, the Central Bank began to purchase gold at a fixed price of 5,000 rubles per gram from commercial banks, probably also in order to stabilise its foreign currency reserves, which include gold. 

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