The proposal is one of a number of measures that would effectively abandon more than a decade of economic policy based on hoarding savings in US dollars and euros, as the Kremlin realigns its strategy after the United States and its allies imposed tough sanctions over Vladimir Putin’s invasion of Ukraine.
At a special “strategic” planning meeting held on August 30, attended by high-ranking officials of the Government and the Central Bank, including governor Elviras Nabiulinas, the plan received initial support, according to sources familiar with the deliberations, who agreed to speak only anonymously due to the non-public nature of the discussions.
Shortly after the news, the yuan rallied further against the US dollar to hit session highs. The value of the Turkish lira rose as much as one percent, although it later changed its dynamics somewhat in Istanbul. The Indian rupee also appreciated briefly.
This approach shows how sanctions fundamentally change Russia’s economic strategy; after the invasion launched in February, freezing about half of the 640 billion US dollar foreign exchange reserves, the Kremlin lost the opportunity to use the money it had been saving for a black day for many years. He also reveals that efforts to diversify these reserves away from dollars and euros to reduce the risk of seizure have had only a limited effect.
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