Wednesday, July 30, 2014

29/7/2014: Pause that hype about Russian reserves draining... for now

There is a lot of media 'noise' around Russia's foreign exchange reserves and the alleged links to sanctions as a causative driver for, what some report as dramatic, declines in Russian reserves.

Here is analysis of the official data.

Two charts first:

Total reserves:

As of the week of July 18, 2014, these stand at 472,500 million USD, down 4.2% on March 1, 2014 (20 days before the first round of sanctions announcements) and down 7.3% on January 1, 2014 (time around which the crisis in Ukraine started to take on sinister character, threatening directly the previous regime and drawing Moscow into it). Year on year the reserves are down 8%, which means that:

  1. Only around 1/2 of the entire decline in reserves can be linked to sanctions; and
  2. The declines down to sanctions were hardly dramatic.
The above (and below) does not deal with changes in foreign exchange valuations or gold price valuations, which can be significantly more than 4-8% swings in the recorded reserves.

Now, onto composition of reserves:

Table below summarises movements in all reserves (we only have official data through July 1, 2014 so far):

Note that while Russian reserves declined on foreign exchange side, they rose on gold side, so the net (combined) effect is shown in the last column of the table. At very worst, sanctions can account for roughly 3% decline in reserves. Again, hardly 'dramatic'.

I will update the above once August 1 data is out.

Update: Here is a chart plotting evolution of Russia's gold reserves:

No comments: