Sain. Petersburg, Russia: Russia said Thursday it was dropping the dollar from its National Wealth Fund (NWF) and shifting to other currencies as the Kremlin presses ahead with efforts to jettison the greenback following rounds of US sanctions.
Some economists said the move was designed to send a signal to Washington ahead of a summit between Russian leader Vladimir Putin and US President Joe Biden on June 16.
The face-to-face meeting in Geneva comes amid the biggest crisis in ties between the two countries in years, with tensions high over a litany of issues including human rights, election meddling, Ukraine, and Belarus.
The Russian economy ministry said that from May 20 the share of dollar assets in the fund had been reduced to 0 percent from 35 percent.
“The changes are aimed at ensuring the safety of NWF assets in the context of macroeconomic and geopolitical tendencies of the past years and decisions aimed at the de-dollarisation of the Russian economy,” the ministry said in a statement.
Finance Minister Anton Siluanov told reporters on the sidelines of the Saint Petersburg International Economic Forum that the changes would be finalized within a month.
The euro will make up 40 percent of the fund, with 30 percent in yuan and 20 percent in gold.
The British pound and the Japanese yen will make up 5 percent each.
ING bank said on Thursday that the restructuring of the NWF would result in the sale of $40 billion from the fund, which as of May 1 was worth close to $186 billion.
Timothy Ash, a senior emerging markets strategist at London’s BlueBay Asset Management, called the move “very political”.
“The messaging is ‘We don’t need the US, we don’t need to transact in dollars, and we are invulnerable to more US sanctions,” he said in a note to clients.
Russia has been gradually reducing the share of its dollar holdings since the West imposed sanctions on Moscow following the annexation of Crimea in 2014.
While the US dollar is essential for international trade, it makes Russia more vulnerable to sanctions from Washington.