Mar 3, 2022 - World

Russia's financial "fortress" falters under the West's sanctions

Graph showing the location of Russian central bank exchange reserves.
Re-created from the Atlantic Council's GeoEconomics Center; Chart: Axios Visuals; Does not include gold held domestically. *This value also encompasses smaller financial institutions. The status of these reserves is unclear.

Russia spent seven years building a financial “fortress” that could help it withstand the impact of sanctions imposed by the West — and the keystone was $630 billion in central bank foreign exchange reserves.

Driving the news: Presumably, Russia didn’t expect the G7 nations to go so far as to freeze those reserves, which they did this week — a move nearly unprecedented in scope.

Why it matters: That fortress isn’t so strong after all if Russia can't use its billions to support its war efforts and fund domestic spending.

  • The G7 has locked up nearly $400 billion of that money, according to estimates by the Atlantic Council's GeoEconomics Center.

Backstory: Since March 2014, Russia has cut its foreign assets held in the U.S. and Europe, while increasing those in China and Japan, as well as its domestic gold holdings, the FT reports.

The big question: How will China handle Russia's yuan assets? China's not expected to freeze them — but faces a dilemma in how to aid its strategic partner, Russia, without running afoul of Western sanctions, Bloomberg writes.

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