The implications of a weakening ruble are serious it makes it more expensive to buy imports and stokes concerns about a banking collapse. Making it difficult to access half of a central bank’s reserves drastically cripples its ability to counter a devaluing currency. The Bank of Russia's assets are spread out around the world, with China and France serving as the two countries with the largest share of holdings (as of ). When looking at where the Bank of Russia’s assets are stored, sanctioning countries make up at least 48.6% of the Bank of Russia’s foreign exchange and gold assets reserves. About 21.7% of its holdings are instead in gold and 13.1% in Chinese yuan.īut the international community’s collective efforts make the sanctions more potent. dollars, according to the central bank itself. dollars.Īs of 2021, only about 16.4% of the Bank of Russia’s reserves are in U.S. Sure, and that’s a big reason why Russia has moved in recent years to reduce its holdings of U.S.
dollars) to prop its value back up.īut if it cannot use those reserve assets because sanctions prevent them from doing so, it becomes vastly more difficult to counteract. When a country’s currency is tumbling, it can buy up its devalued currency using its reserve assets (i.e. For the Bank of Russia, even though it may own reserves of foreign currencies and gold, those bills and bars may be held in Japan or in the United States.īecause a currency’s value can fluctuate according to the flow of foreign exchange around the world, central banks often hold a war chest of other countries’ currencies - and sometimes gold - to counter any risk of devaluation. In today’s modern financial system, most assets are not physically held but accounted for digitally. The Treasury’s actions did not necessarily “freeze” the Bank of Russia itself, but rather any assets that it holds abroad. What does it mean to freeze a country’s central bank assets? in essentially freezing the Bank of Russia’s assets, including Japan, Germany, the United Kingdom, the European Commission, and Italy.
Doing so harms the government’s ability to defend the Russian ruble from rapid devaluation. Treasury’s Office of Foreign Assets Control (OFAC) blocked off the Russian central bank’s access to any of its assets in the U.S. A devaluing currency makes sense, given sanctions on Russia’s largest banks and the severance of other firms from the international banking system known as SWIFT.īut the most impactful measure on the Russian ruble is the Western freeze imposed on the nation’s central bank, the Bank of Russia.
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