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May 14, 2022
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Washington prepares new dirty tricks for Russia

They are trying to get their hands on the other half of Russia’s international reserves

The most sensitive economic sanction of the collective West against Russia since the beginning of the sanctions war was the freezing of about half of Russia’s international reserves. These are reserves denominated in US dollars, euros, British pounds sterling, Japanese yens, Canadian dollars, Australian dollars, Swiss francs. The Bank of Russia names the rounded amount of frozen assets – 300 billion dollars.

The paw of the collective West did not reach the second half of the reserves. First of all, it’s gold. As of January 1, 2022, its value was $131.5 billion, or 21.5% of all reserves. Also Chinese yuan 104.8 billion dollars, or 17.1%. Finally, in the composition of international reserves there are still some positions for which there was no freeze (or at least no such freeze was reported): 1) The country’s net position in the IMF is $4.3 billion (0.7% ); 2) Securities of international organizations – 23.3 billion dollars (3.8%); 3) Special drawing rights – 24.2 billion dollars (3.9%). It turns out that the reserves avoided frosts, which in total accounted for 47%. These are statistics at the beginning of the year.

And now, for two and a half months, Washington has been trying to get its hands on the other half of Russia’s international reserves. On March 24, the US Treasury decided to extend sanctions to Russian gold. A ban has been introduced on any transactions with gold (for its purchase on the world market to replenish gold reserves, for sale from reserves). The European Union has joined the golden blockade against Russia. The sanction, however, as experts note, does not promise much success for the United States and its European allies. Washington and Brussels cannot freeze the existing gold reserves of the Russian Federation. all this reserve is physically located on the territory of our country. It is practically also difficult to block operations with gold from reserves (the experience of Iran testifies to this).

Gradually, Washington’s attention shifted to another component of Russia’s international reserves – funds in the form of SDRs (special drawing rights). This is a specific currency issued from time to time by the International Monetary Fund (IMF) and distributed among all member countries of the Fund in proportion to their quotas in the capital of the Fund. The first issue of the SDR was made back in 1969. The last one is August 23, 2021. Last year, the Fund issued its own currency in the amount of 456 billion SDRs, which is equivalent to 650 billion dollars. Russia’s share is 2.71%, and it got 12.9 billion SDRs (in equivalent at the rate of SDR to US dollar at that moment – more than 17 billion dollars). Taking into account the funds previously available in the SDR account, the total amount of special currency in Russia reached $24.2 billion at the beginning of this year.

The SDR is a very specific currency. First, it exists only in non-cash form. Secondly, its scope is very limited. With its help, a member country of the Fund can repay the current debt to the Fund. May convert SDRs to other reserve currencies for some specific purposes. First of all, to pay off sovereign debt. SDRs cannot be used for ordinary purposes, such as the purchase of goods or investments. SDRs are held in a special account by the IMF and are included in the state’s international reserves.

Russia has never resorted to using the funds in the SDR account for conversions into US dollars and other reserve currencies, as well as to pay off debt to the Fund (by the way, Russia has been acting as a net creditor to the IMF for several years). We can say that Russia’s funds in the SDR account are dead weight.

Of course, it’s not bad that in August 2021, thanks to the large-scale issue of SDRs, Russia’s international reserves increased overnight by more than $17 billion, but for her this “gift” was not critical. Unlike, say, Ukraine, which was waiting for the distribution of SDRs like manna from heaven. On August 23, it received the equivalent of $2.7 billion in SDRs, which helped Ukraine avoid a sovereign default.

However, let us return to the sanctions war against Russia. After freezing that part of Russian reserves that were easy to freeze, Washington began to consider actions to block Russian funds in the SDR account. In early March, a Republican congressman french hill and Republican Senator Bill Hagerty prepared an appeal to the US Secretary of the Treasury Janet Yellensigned by 30 members of both houses of Congress. “The Biden administration’s backing of a $650 billion total IMF appropriation, of which more than $17 billion went to Russia, ran counter to U.S. sanctions against Moscow even before the invasion of Ukraine. We cannot allow these reserve assets to help the regime counter the latest sanctions announced by the President, let alone offer additional billions through additional appropriations.“, the statement says.

Legislators urged the US Treasury not to make such mistakes in the future. The United States, as the main shareholder of the IMF, must conduct a “selective” distribution of newly issued SDRs. In particular, not to provide additional allocations of SDRs to Russia. “As the IMF’s largest shareholder, the United States has a responsibility to ensure that the fund is not misused to support Russian warmongering in Ukraine. We urge you to take all necessary measures to prevent this from happening.”, – concluded the American legislators.

In fact, they called on the US Department of the Treasury to seek the destruction of the Fund’s rules of operation that have existed for decades and proceeded from the principle of non-discrimination of member states. Janet Yellen cannot fail to understand that Washington’s attempts to deprive Russia of the right to receive its share in possible new SDR issues could provoke a serious IMF crisis. However, Washington is doing everything possible to harm Russia. In particular, using its veto right (the US share in the Fund’s capital is 17.5%, and 15% is enough to block decisions), it is possible to block decisions on issuing loans to Russia. True, Russia does not feel the need for such loans.

Another dirty trick that is being prepared in Washington is a draft law prohibiting the US Treasury from exchanging Russia’s SDR funds for dollars. The development of the document began in March, after some time Belarus was included in the bill. The document is titled Russian-Belarusian SDR Exchange Prohibition Law of 2022 (Russia and Belarus HAPPY BIRTHDAY Exchange Ban Act from 2022). On May 11, the lower house of the US Congress passed a vote on this bill. He was supported by 417 congressmen, only two lawmakers opposed.

The term of the ban on the exchange of Russian SDRs for US dollars is 5 years. The ban could be lifted earlier if “the President reports to Congress on the cessation by the governments of Russia and Belarus of destabilizing activities directed against the sovereignty and territorial belonging of Ukraine.” The document obliges the head of the US Treasury to convince other countries that they “similarly refused to convert” the SDRs of Russia and Belarus into reserve currencies.

It is expected that in May the bill will be supported in the upper house of the US Congress and signed by the American president by the end of the month.

Russia from the adoption of this law will be neither hot nor cold. Let me reiterate: the funds in the SDR account for Russia are non-performing assets. But to the International Monetary Fund, this legislative initiative of Washington can cause significant damage. Considerations of political expediency are increasingly undermining the principles of operation of this international financial organization.

Photo: investforum.ru

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