Russia will not abandon the dollar, but will consider the risks

© RIA Novosti / Vladimir Traveloperator in photobacteria banknotes of Russia and the USA. Archival photoRussia will not abandon the dollar, but will consider the risks© RIA Novosti / Vladimir Traveloperator the image Bank

Russia is not going to abandon investments in dollars and payments in the American currency, but was aware of sanction risks and trying to minimize them, said Russian President Vladimir Putin.

Speaking at a press conference on the results of the BRICS summit in South Africa, he noted that Russia will use the dollars if this will not interfere with the US but warned that introducing limits on the calculations of the American government undermine the credibility of their own currency.

«Russia is not abandoning the dollar. The dollar is the universal reserve currency. More or less it may qualify and the Euro, but not in full. Therefore, we are well aware of what the dollar is today,» the Russian leader said, answering the question of the reduction of the Russian investments in us government bonds.

This issue arose against the background of uncertainty related to the decrease of the Russian investments in the national debt of the US sanctions, doubts the Bank of Russia in reliability of these government bonds or government statements about the need to reduce dependence of the Russian economy from the dollar.

11-year low

According to the US Treasury, Russia for two consecutive months was sharply reduced investments in us government bonds in April — 47.5 billion dollars more in may at 33.8 billion. As a result, in June of this investment fell to 14.9 billion dollars — the lowest since 2007. Thus, Russia is no longer included in the list of 33 largest holders of us Treasury securities, while in March was 16-th line of the rating.

The head of the Bank of Russia Elvira Nabiullina after the April statistics said that the Central Bank pursues a policy of diversification of international reserves and when making decisions takes into account all risks, including financial, economic and geopolitical.

On Monday, Deputy Finance Minister Sergei Storchak said that tried to find out the reasons for the reduction of Russian investments in us securities, the first Chairman of the Central Bank Ksenia yudayeva, however, she refrained from answering.

Most experts attributed the reduction of Russian investments in us government bonds with the geopolitical factors, but some of them is explained by the market situation and the desire of the Central Bank to diversify foreign reserves. There are those analysts who believe that the reduction of Russian investments in US treasuries may be accounting operation (i.e., according to them, theoretically, Russia could transfer these securities into nominal holding in the jurisdiction of another country).

Putin’s position on the universality of the dollar supports Professor at the faculty of Economics Oleg Vyugin, in the past held senior positions in the Ministry of Finance and the Central Bank. In his opinion, Russia should have investments in us government bonds in the amount of about $ 40 billion to maintain operations in the foreign exchange market.

The calculation for dollars

Putin, answering the question of payments in dollars, said that Russia will not make any sudden movements. «We are not going to make any sudden movements, do not in any way going to abandon the dollar. We use and will use in so far as the financial authorities of the United States will not interfere with the use of dollars in settlements», — said the President.

«As our American partners and those restrictions they impose, including in the calculations in dollars, I believe that this is a big strategic mistake… Because they thereby undermine the credibility of the dollar as a reserve currency», — says the head of state.

A few years ago nobody thought that instruments such as currency, can be used in the political struggle, Putin said. «We need to minimize the risks. We can see what’s going on with these sanctions, illegal restrictions. And we are aware of these risks and trying to minimize them», — he said.

The President also noted that not only Russia but many other countries are talking about creating a new reserve currency. In his opinion, the properties of the reserve currency becomes the yuan, which is included in the pool of the IMF. Putin is convinced that the importance of currency depends on the weight of the national economy.

In turn, the head of the second assets of the Russian Bank VTB, Andrey Kostin, who plays for the de-dollarization of the Russian economy, has recently prepared draft proposals aimed at further expanding the use of the ruble in international payments and has asked Putin to support them. Kostin pointed out that the US represents the greatest threat from the point of view of the introduction of different kinds of sanctions more than Europe or other countries.

Meanwhile, the dollar still occupies the main share in the structure of international reserves of the Russian Federation. According to the Central Bank, the dollar’s share in 2017 45.8%.