Despite Western economic sanctions, Russian foreign currency reserves have continued to grow. The Bank of Russia reported this week that as of June 16th, the nation’s foreign holdings reached $587.5 billion.
In the week since June 9th, the volume of foreign reserves increased by $1.8 billion, or 0.3% according to the regulator’s analysis of the data, a move it attributed largely to “a positive market revaluation.”
Foreign reserves decreased by 1.95%, or $11.6 billion, to $584.1 billion in May, after cruising past $600 billion in April. On February 18, 2022, the stockpile of foreign reserves hit a record high of $643.2 billion, however it dropped by 8.4% over the past year to come in at $577.5 billion on January 1, 2023.
Following Russia’s invasion of Ukraine, in March of 2023 Western sanctions froze roughly half of Russia’s foreign reserves which were held abroad. The remaining assets, which were held domestically and beyond the West’s reach, consisted of foreign currencies including Chinese yuan and gold.
The EU has been discussing ways it might be able to use the frozen Russian holdings for the reconstruction of Ukraine following the war. Ursula von der Leyen, the President of the European Commission said earlier last week that she will submit a legal proposal to transfer the assets to Ukraine before July 25th, when the commission heads for its summer break.
However many observers warn such an action is without legal justification. They note that unilaterally seizing the funds and giving them to another entity will create a dangerous legal precedent which will undermine the credibility of the EU banking system, as well as the euro.
Austrian Foreign Minister Alexander Schallenberg noted that if the Russian assets are confiscated and given away, only to have it be legally challenged, and the courts later overrule the move once the funds are gone, it “would be a diplomatic and economic disaster.”
For its part, Russia has condemned the EU’s freezing of the assets, and its plans to seize the funds and give them to Ukraine, calling the move theft, and threatening retaliatory measures.
