World Economy

Support for Ruble Cuts Russia Reserves by $15.7b

Support for Ruble Cuts Russia Reserves by $15.7b
Support for Ruble Cuts Russia Reserves by $15.7b

Russia’s international reserves plunged the most in six years, losing $15.7 billion last week as the government and central bank pledged measures to support banks and defend the currency, Bloomberg reported.

The value of the stockpile, which includes the central bank’s reserves and two sovereign wealth funds, fell to $398.9 billion in the week through Dec. 19, the Bank of Russia said on Friday. That is 22 percent drop from January.

Policy makers, led by central bank Governor Elvira Nabiullina, are fighting to stem the ruble’s worst slump since the 1998 default. With oil prices and sanctions over the Ukraine conflict pushing Russia toward recession, the authorities have raised rates and sought to ease dollar demand. The steps have helped stem the currency rout, after the ruble collapsed to a record low 80 against the dollar last week.

Russia sold about $4.8 billion in market interventions and provided $9.8 billion under foreign-currency repurchase agreements in the week through Dec. 19, according to central bank data. In the previous seven days, the reserves dropped $1.6 billion.

A revaluation also contributed to the contraction as the US dollar strengthened against euro, the central bank said. Funds placed under foreign-currency repurchase agreements will be returned to the stockpile, according to the statement.

The pure monetary component of the central bank’s reserves has dropped to about $172 billion, or enough to cover 6.5 months of imports, which is still very far from critical levels.

The ruble lost about 27 percent against the dollar during the past three months, the worst performance among more than 170 currencies tracked by Bloomberg. The Russian currency strengthened 1.5 percent to 52.65 per dollar on Friday.

 Blacklisted Banks Appeal EU Sanctions

Russia’s two biggest lenders Sberbank and VTB, as well as Russia’s foreign development bank Vnesheconombank (VEB) have appealed to the European Court of Justice against EU sanctions, saying there was not enough evidence for their introduction.

The sanctions imposed in July on Russian banks banned some of the biggest lenders from getting long-term borrowing from the international financial markets.

The sanctions criterion stipulates that “key credit organizations or other development institutions where the government has or controls more than 50 percent,” should be blacklisted. Another group of companies include the firms that contribute to improving Russia’s competitiveness, diversification and stimulate investment.