Tuesday, March 3, 2015

3/3/15: Those 'tanked' Russian Forex reserves

So, according to some Western media, Russian forex reserves have tanked in February 2015. What happened, folks?

At the end of January 2015, Russian forex reserves stood at USD376.208 billion. Of which USD327 was in currency and liquid assets form. The latest data, given to us is for February 20, 2015 when, according to the Russian Central Bank, the reserves dropped to USD364.6 billion - a drop of 3.11% or USD11.6 billion. That's a lot of cash. But is not qualifying it as 'tanked'. Here's a chart plotting all reserves changes m/m

So (incomplete still) data for February puts drawdowns from the Forex reserves at USD11.61 billion against 12 mo running average monthly drawdown of USD10.73 billion. February marks the fourth biggest drawdown in 12 months. Again - large, significant, but 'tanking'?!

What is more critical is the source of drawdowns: how much of this is due to repayment of corporate and sovereign debt? How much is down to changing dollar value of other assets held? How much taken in form of loans to companies and banks (at least in theory or in part - repayable)? and so on.

No, the numbers are not catastrophic. Although they are unpleasant. Just as the gloating in the media is unpleasant: if the U.S. were to cut its external deficit by 2/3rds - what would be the headlines in Western media? And now note: February drawdowns from the forex reserves marked:

  • 2/3rds reduction in drawdowns compared to December (real disaster of a month); and
  • Large chunk of these drawdowns probably (we will know later for sure) went to fund debt reductions of Russian banks, companies and sovereign.

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