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Stud Russ Econ Dev. 2023; 34(1): 9–18. PMCID: PMC10072797
Published online 2023 Apr 4. doi: 10.1134/S1075700723010185 PMID: 37033714 RESOURCES

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Dedollarization as a Direction of Russia’s Financial Policy in Current
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Under financial sanctions imposed on it by the US and the EU, Russia accelerated
dedollarization of the economy in order to protect its sovereignty in strategic rivalry
with the US. To this end, a set of strategies has been developed, such as reducing the
direct use of US dollars, cutting the share of the dollar in foreign exchange reserves,
expanding nondollar funding, increasing gold reserves, as well as reserving and
creating its own systems of payment and exchange of financial information. This
practice is of great importance for reorganizing the dollar-dominated international
monetary system and establishing a new economic and financial system.

Keywords: US–Russian relations, financial sanctions, dollarization, dedollarization,

offshore economy

Since the beginning of the Ukrainian crisis, Western countries led by the United
States have successively imposed 10 128 sanctions against Russia in various areas.1
For its part, Russia has taken certain antisanctions measures, among which
“dedollarization” is of a fundamental character [1]. In the global trend of
dedollarization, Russia’s actions are the most radical with a significant demonstration
effect. On April 15, 2021, US President Biden signed a decree on the start of a new
round of sanctions against Russia, prohibiting US financial institutions from
participation in the primary market for ruble or euro-denominated bonds issued after
June 14, 2021.

Russia reacted quickly by announcing that the US dollar would no longer be accepted
into the currency basket of the Russian National Welfare Fund since May 20.2 On
June 3, 2021, at the St. Petersburg International Economic Forum, the Russian
Ministry of Finance announced that it would adjust the asset structure of the Russian
National Welfare Fund within a month to reduce the share of dollar assets to zero. On
July 5, the Ministry of Finance reported that the task was completed, and dollar
assets were completely removed.3 At the same time, Russia almost sold off long-term
US Treasury bonds, which shows that with the deepening of the US–Russian
sanctions confrontation, the dedollarization of the country enters a new stage.

Motivation for Russia’s dedollarization.

Protection of the state’s monetary sovereignty. The issue and circulation of local
currency are the basis of monetary sovereignty. When a country’s basic goods and
services are traded in foreign currency rather than in local currency, the country’s
monetary sovereignty is violated. In the dollarized Russian economy, this violation
undermines Russia’s independence in conducting its monetary policy. This is so
because foreign currency does not always meet local payment needs, its use leads to
fluctuations in the exchange rate of the ruble due to the rapid inflow of hot money,
puts the economy under the influence of the monetary policy of the US Federal
Reserve, increases inflation as a result of volatile exchange rates, forces the Russian
government to hold more foreign exchange reserves to cope with financial risks, etc.
In such circumstances, dedollarization is a natural choice for a state to protect its
monetary sovereignty.

Strategic rivalry with the US. The Soviet Union and the United States had been rivals
in global geostrategic competition. Then Russia’s position somewhat weakened.
However, under Putin’s leadership, Russia has regained not only its political stability
but also its commitment to the mission of continuing its strategic rivalry with the
United States. The United States uses the dollar, the international currency, as a
decisive argument for imposing sanctions on other countries. Thus, the hegemony of
the US dollar serves as an economic basis for claiming hegemony around the world,
for influencing regional or international affairs. After Russia’s launching the special
operation in Ukraine, the US and the EU imposed sanctions against Russia.
Therefore, dedollarization is only a natural continuation of the Russian–American
strategic rivalry in the financial sector and the international monetary system.

Competition for power in oil pricing. Russia is a major energy exporter and the
Russian economy is a typical energy economy that depends on exports. Since 1973,
international crude oil prices have been pegged to the US dollar, making it the
currency for international energy settlements. This negatively affected Russia
because despite owing oil it was unable to manage its pricing. For this reason, Russia
has established the Russian Oil Trading Platform4 and the St. Petersburg
International Commodity Exchange in order to value exported crude oil in rubles.
Russia also withdrew REBCO from the New York Mercantile Exchange and
conducted trading on the St. Petersburg Commodity Exchange, owing to which it
gained the ability to set prices for domestic petroleum products. This platform is fully
supported by Russia, and 1/4 of the total volume of oil products purchased by the
state is traded here. Gazprom, with its state-controlled shares, guarantees the supply
of oil to large buyers such as the Russian Ministry of Defense, the Ministry of
Emergency Situations, and the Ministry of Agriculture, which is crucial for the
stability of Russia’s macroeconomics. In order to keep the price policy of oil exports
entirely in its hands, the Russian government utterly refuses to allow US companies
to join the platform. For the same purpose, Gazprom created the largest gas exchange
in Europe in St. Petersburg. In order to ensure national economic security and
maximize the interests of Russia’s main export, Russia needs to compete for the price
of oil, which, however, is pegged to the dollar.

Combating international sanctions. At the end of 2013, the Ukrainian crisis erupted,
after which, at the suggestion of the United States, Western countries began to
impose sanctions against Russia. The sanctions include the following aspects:

– Inclusion of Russians in special sanctions lists. More than 400 people and over
500 legal entities in Russia have been included in the US Treasury Department’s
Office of Foreign Assets Control (OFAC) sanctions list. In November 2014, the US
State Department announced sanctions that included a ban on Russian state-owned
banks from using US dollars for settlements, which led to the stagnation of Russian
international business activity [2]. A typical case was the measures against the
aluminum company RUSAL.5

— Threat of Russia’s disconnection from the SWIFT system. The US, UK, and other
countries have repeatedly threatened to cut Russia’s connection to the SWIFT
system. A policy report6 released by the Republican Research Committee of the US
House of Representatives in June 2020 notes that the United States cannot control
SWIFT but it can impose sanctions until Russia is completely excluded from the
system.7

— A ban on the purchase of Russian bonds by the US and EU. Around 2006, the
Russian government paid off its foreign debts. In recent years, most of Russia’s
external debt has been corporate debt. In order to impose sanctions on Russia, the US
and EU prohibit domestic or related foreign financial institutions from buying ruble
and nonruble bonds issued by the Russian Central Bank, the Ministry of Finance and
the National Welfare Fund in the primary market.8 The US and EU sanctions cut off
the channels of financing for Russia and limited the economic exchanges of Russian
enterprises with European and American ones. At the same time, foreign financial
institutions refuse to do business with Russian companies included in the sanctions
list, fearing that they will also fall under sanctions. This resembles a “financial
nuclear attack” on Russian enterprises, as it is now very difficult for them to get
Western loans. Even if a foreign loan is finally granted, the conditions will be tough
and the interest rate will be very high. At the same time, Russia’s huge foreign
exchange reserves were either invested in US Treasury bonds and securities, or
deposited in Western banks, where, in fact, they functioned as low-interest loans
offered to the United States. Russian enterprises then received loans from the West at
the market interest rate. According to experts, Russia’s annual losses in foreign
exchange reserves alone amounted to at least 25 billion US dollars.

— Extension of the US “long-arm statute.” According to the principle of “minimum

contacts,” transactions carried out in dollars or through American banks
automatically come under the jurisdiction of the United States. Thus, Russia falls
under possible sanctions from America as soon as it sells energy or any other product
in US dollars to other countries.

— Impact on the Russian stock market. Financial sanctions against Russia by the US
and the EU have a huge impact on the Russian capital market, which is small in scale
and vulnerable in structure. More than half of the investors in the Russian stock
market were from Western countries [3]. Therefore, the US and EU financial
institutions had the opportunity to put pressure on the ruble in order to depreciate it,
only in 2018 the ruble rate fell by more than 30% [4].

— The possibility of freezing assets. Due to the United States’ unilateral policy,
economic sanctions, and the use of the dollar as a factor in pressure on
counterparties, the assets of many countries were frozen.9 More and more countries
that have fallen under sanctions are forced to take the path of dedollarization, and
among them Russia is the largest.10

The impact of the US dollar is declining due to economic problems in the US itself.
In recent years, the US dollar has gradually become a high-risk asset, and this is also
an important reason for Russia’s dedollarization policy.

Concerns about the medium- and long-term development of the US economy. The
US economy has hit a rough patch in recent years and lacks growth potential. Due to
the impact of the COVID-19 epidemic, it has shown signs of recession or even
stagflation. The impact of American shale oil and alternative energy sources on the
petrodollar system deepened. The total factor productivity of the United States is
declining. The pretax profit of enterprises in the US registers zero growth. All these
and many other factors make people pessimistic about the medium and long-term
development of the US economy.

Concerns about growing US debt. Before the epidemic, the debt of the US federal
government reached 23.3 trillion US dollars, and by July 2021, it exceeded 28.5
trillion, while GDP in 2020 amounted to only 20.6 trillion US dollars, and public
debt amounted to 128% of GDP. The annual growth rate of US GDP was only about
3%, well below the growth rate of debt. Given the current rate of debt growth, the US
government will increase its debt by at least ten trillion US dollars over the next ten
years. The US Financial Supervisory Authority has warned that in 2028 US debt
repayments will reach 1.05 trillion US dollars and they can only be repaid if GDP
growth exceeds 7%. The US Treasury has announced plans to issue 20-year Treasury
bonds or even 50-year11 or 100-year treasury bonds.12 The US Federal Reserve’s
ability to buy bonds cannot keep pace with future debt growth, and the imbalance
between US bonds and US Federal Reserve bond purchases would be catastrophic. In
the future, the United States will not even be able to pay the yield on US bonds, let
alone the principal.

Treasury bonds are only part of the US debt, corporate debt in the country also
reached a record level. Together with household debt in the first quarter of 2020,
America’s total debt reached 55.9 trillion US dollars and amounted to about 260% of
GDP.13 There is a danger that the potential risks of nonpayment on US Treasury
bonds will provoke a new round of the financial crisis.

Concerns about US debt losing its role as a safe haven. Countries around the world,
in order to maintain and increase the value of their dollar reserves, are converting US
dollars into US debt to earn meager interest income. Therefore, the large amount of
US debt, together with the subsequent interest income, attracts investors from all over
the world. However, in recent years, the role of US debt as a safe haven has been
steadily weakening. In the first half of 2021, the US debt rate generally declined. The
US debt issued by the US Treasury is likely to be useless. Many US debt holders are
disposing of it. US Treasury International Capital (TIC) report shows that as of the
end of April 2021, US debt held by foreign holders was 7.07 trillion US dollars,
almost 50 billion US dollars less than at the beginning of the year.

Concerns about oversupply of US dollars. The US Federal Reserve announced

launching an unlimited policy of quantitative easing by expanding the money supply
in order to redistribute social wealth and achieve economic recovery and social
stability. The US economy is increasingly dependent on financial stimulus provided
by quantitative easing policies. In the 21st century, the overissuance of the US dollar
has led to three major “defaults” around the world. After the 9/11 incident in 2001,
the United States launched military operations in the Middle East and at the same
time began to cut interest and print money. During the 2008 financial crisis, the US
Federal Reserve launched three rounds of QE (quantitative easing policy). US
Federal Reserve liabilities expanded from over 900 billion US dollars to 4.5 trillion
US dollars. After the outbreak of the COVID-19 epidemic in 2020, on March 16, the
US Federal Reserve reduced the interest rate to zero and launched a massive
quantitative easing program for 700 billion US dollars. On March 23, the Fed began
buying US Treasuries and mortgages to support the stock market. The US Federal
Reserve printed an additional 2.5 trillion US dollars (obligations on the balance sheet
expanded from 4.1 trillion US dollars to more than 6.7 trillion US dollars). The
United States has invested more dollars than all reserves combined in history.
Repeated defaults and excessive dollar issuance marked a historic change in
confidence in the US and the US dollar.

Concerns about long-term depreciation of the US dollar. The global dollar supply is
constantly declining, which is accompanied by a long-term depreciation of the US
currency. In the medium and long term, the dollar will continue to decline, and its
share as a reserve currency in the international monetary system will decrease.
Whenever there is a crisis, the US dollar depreciates sharply to stimulate exports,
employment, and a quick economic recovery when other countries are still trapped in
difficulties. The US dollar, as an international reserve and safe-haven currency, is
strengthening due to rising demand, making the whole world pay for the financial
crisis. In fact, as long as the American currency is issued in huge quantities, the
international financial crisis will occur periodically. The currencies of developing
countries are mainly pegged to the US dollar and they tend to depreciate in line with
its growth. The cycle of rising and falling of the dollar, in essence, leads to an
imbalance in the international economy, which will trigger the next round of the
financial crisis.

Concerns about the dollar-oriented international financial system. The

shortcomings of the dollar-based international financial system have caused a
cyclical imbalance in the world economy and frequent financial crises. In a dollar-
dominated system, the US can issue money without the obligation to maintain its
stable exchange rate. There are too many derivatives in developed US finance,
including more than 300 trillion of various borrowed financial assets. Bubbles in
GDP have been growing there steadily for more than a decade. This, together with
industrial depletion, excessive credit consumption, and zero savings, makes the
country increasingly vulnerable to the financial crisis. Once the US debt crisis breaks
out, it will definitely affect the whole world. In addition, the US threatens to impose
sanctions at every turn, directly or indirectly affecting the economies of other
countries, causing economic instability, which in turn will lead to regional and even
global financial collapses. Since achieving independence, Russia has experienced
many financial upheavals and it is therefore in dire need of financial and economic
stability.

Diversification of the international financial system. The status of the US dollar as

an international currency is based on its being pegged to oil. At present, this
international monetary system has reached a point where it must be changed. On the
one hand, the international community is increasingly dissatisfied with the
petrodollar-pegged system. There are many problems in the international financial
system centered on the US dollar, as the exchange rates of major currencies
experience sharp ups and downs with increased foreign exchange risk. As a result,
commodity prices fluctuate wildly around the world hindering normal international
trade and investment. On the other hand, in recent years, the rapid development of
new energy around the world has affected the petrodollar system, and the speedy
progress of the shale oil industry in the United States has turned America from an
ally into a competitor of Saudi Arabia and other energy exporting countries. The
international financial system based on petrodollars was shaken. Economies around
the world are actively looking for a way to break away from the hegemony of the
dollar, hence the emergence of the Eurozone, the rapid development of the Asian
Infrastructure Investment Bank (AIIB) and the creation of the BRICS Bank, etc. All
these facts show that countries dedollarize in their own way. Dedollarization is no
longer a fragmented choice of a few countries; instead, it is becoming a global trend.
Russia, as a huge country with great global influence, has taken many measures in
this direction, reflecting the general needs and future trends around the world.

Russia’s strategy for dedollarization.

With its long history of major power competition, Russia understands that
dedollarization will be a long-term process. It includes the following measures:

Use the situation to turn the crisis into an opportunity for development. After the
collapse of the Soviet Union, the Russian economy was heavily dependent on dollars.
After the events in Ukraine in 2014, Western countries led by the United States
introduced several stages of sanctions against Russia in the field of energy, finance,
and national defense, which had an impact on the Russian economy. While in 2013
the volume of trade between Russia and Europe amounted to about 410 billion US
dollars, by 2020 it has decreased to 219 billion US dollars. Under US and EU
sanctions, Russia was forced to retaliate in the financial sector. In particular, its own
payment system (MIR) and financial information exchange system (SPFS) were
created, which became the basis of Russia’s financial infrastructure for
dedollarization.

Influence public opinion. As President of Russia, Putin repeatedly expressed his

position on dedollarization. At a meeting held in Astana in March 2015, the Heads of
States of Russia, Belarus, and Kazakhstan discussed the creation of a monetary union
aimed at getting out of dollar control. Putin emphasized the importance of
dedollarization in terms of protecting Russia’s national sovereignty and that the use
of the US dollar as a “weapon” for sanctions undermined its status.14

Sergei Glazyev was an economic adviser to President Putin and one of Russia’s
spokespersons for dedollarization. He called for reducing dependence on US dollars
in domestic economic, as well as in investment and trade activities within the
Eurasian Economic Union, the Shanghai Cooperation Organization and the BRICS
framework, the sale of government debt of NATO countries, reducing the purchase
of government bonds from countries participating in sanctions against Russia, and
reducing dollar settlements and limiting foreign exchange reserves of commercial
banks to prevent speculation and capital flight.

Elvira Nabiullina has been Governor of the Central Bank of Russia for many years.
Back in 2016, she made dedollarization one of the permanent missions of the
Russian Central Bank.15 Over the years, on several occasions16 she has offered
concrete ideas and proposals on this direction of financial activity. Russian Finance
Minister Anton Siluanov had formulated specific measures: to combine
dedollarization and tax incentives in 2018.17 Dmitry Peskov, Press Secretary of the
President of Russia, Maxim Oreshkin, former Minister of Economic Development
(currently Assistant to the President of the Russian Federation), Andrey Kostin,
President of the Russian Foreign Trade Bank (VTB), and Vyacheslav Volodin,
Chairman of the Russian Duma repeatedly spoke on this topic. Since June, we have
observed withdrawal of dollars from the Russian National Welfare Fund.

At the St. Petersburg Economic Forum 2021, dedollarization was heatedly debated
once again. In Russian government circles, a complete consensus has been reached
on this issue.

Formulate a strategic plan. In April 2018, the RF Ministry of Economic

Development, Ministry of Finance, and the Central Bank of Russia jointly formulated
a dedollarization plan, which included18 such measures as granting preferential
treatment for exports calculated in rubles, accelerating the recovery of value added
tax for exports, and gradual abolition of mandatory repatriation of export earnings
(in rubles). The plan also emphasized that dedollarization at that time did not mean
an immediate and complete rejection of the use of US dollars, and this would not
affect the foreign currency accounts of Russian depositors in any way. Russia is
reducing its dependence on US dollars in a well-planned and dynamic way.19

Speed up dedollarization, explaining why it is necessary. With the development of

negative dynamics in Russian-American relations, the dedollarization measures for
Russia are gradually being accelerated and modernized. The use of the US dollar in
settlements decreased from 61.5% in the first quarter of 2020 to 48.3% in the first
quarter of 2021. On June 3, 2021, the Russian government held an economic forum
in St. Petersburg where it announced that the US currency would be completely
withdrawn from the National Welfare Fund by July 5, 2021. At the same time, in
domestic and foreign media, Russian public officials have repeatedly emphasized that
the country’s dedollarization is forced due to US and EU sanctions, thereby
appealing to the opinion of the international community and actively expanding the
circle of its allies.

Highly appreciate and develop international cooperation. Russia is a large country

with serious international influence and rich experience in international competition.
It values strengthening cooperation with China, India, Turkey, Iran, as well as is
making maximum use of the Eurasian Economic Union, SCO, BRICS, and other
international organizations in order to develop relations with their member countries.

Measures and consequences of dedollarization in Russia

As tensions between the Russian Federation and the United States grew, the
dedollarization policy in Russia was gaining momentum. After the global financial
crisis in 2008, Russia took the initiative by proposing to peg the ruble to gold instead
of the US dollar.20 After the introduction of anti-Russian sanctions by the US and
Europe in 2014, Russia has already officially started dedollarization. In 2016, this
process accelerated, and in 2018, it became large-scale. After the US announced a
new round of sanctions, dedollarization is once again becoming a hot topic. Against
this background, Russia has taken a number of specific measures.

Direct reduction in the use of dollars. Strengthening restrictions on the circulation

of US dollars in the RF, control of consumer protection in Russia,21and a ban on
payments in foreign currency. It is mandatory for all sales outlets to install a POS
machine to support cashless payments in rubles, reject foreign currency payments in
the domestic economic system, strengthen foreign exchange regulation, standardize
conversion between US dollars and rubles, and combat black market transactions in
currencies.

Higher requirements for the banking industry. When Russia became independent,
there were more than 2400 domestic banks, and by 2020, this number dropped to
almost 400. The main purpose of this reduction was to reduce leverage. Oversight of
US dollar deposits has also been strengthened. Commercial banks were required to
have different reserves for deposits in national and foreign currencies. In addition, the
interest rate on US dollar deposits was virtually reduced to zero; additional
conditions were added for issuing loans in foreign currency, the reserve required for
loans in local currency was reduced, and mortgages in dollars were banned.

Since 2013, the Central Bank of Russia has been taking measures to reduce the share
of US dollars in money transfers both within Russia and abroad. As of September
2018, the share of foreign currency deposits of individuals and legal entities in
Russian banks decreased from a peak of 37% in 2016 to 26%.

Reducing the use of US dollars in international settlements. The RF Ministry of

Economic Development has developed a plan for dedollarization in foreign trade.
The role of US dollars in Russian foreign trade settlements is gradually decreasing.
Only in the first half of 2019, the share of dollar settlements shrank from 54.8% in
2018 to 51.2%.

Russia, as a major international energy exporter, has announced that from 2019, it
will refuse to accept payments in US dollars for crude oil and natural gas
transactions, and importers must pay in euros or other currencies. At the end of 2019,
the share of euro in Russian trade settlements increased to 42.3%, which is almost
equivalent to the share of US dollars (46.6%).22

In foreign trade, the dollar was replaced by the euro, yuan, ruble, and other
currencies. Over the five years from 2013 to 2018, the share of the euro in Russia’s
exports to the EU countries almost doubled from 18.1 to 34.3%.23 In 2018–2019
alone, the participation of the euro in Russian–European trade increased from 32 to
42%. Over the same period, US dollar settlements in Chinese–Russian trade
decreased from 50 to 45.7%, while euro settlements increased from 0.7 to 37.6%.24

Russia’s settlement currency has moved from US dollars to rubles or other foreign
currencies in trade with the CIS, EAEU, SCO, and BRICS countries. In October
2019, the share of settlements in the national currency within the framework of the
Eurasian Economic Union was 76.6%, of which 72% was in rubles.25 According to
the plan of the RF Ministry of Economic Development, the volume of trade in
Russian goods and services in rubles in 2024 will reach 300 billion US dollars, and
the rate of settlements in the national currency with the countries of the Eurasian
Economic Union will be increased to 90%. In 2020, 62% of trade with CIS countries
was conducted in rubles.

Owing to the above measures, Russia was able better to avoid the use of US dollars
in international economic activity and it has made a significant shift from US dollars
to euros in international settlements in order to expand the space for international
trade and economic exchanges. In the new era, within the framework of Sino–
Russian strategic cooperation, Russia uses the yuan as an international settlement
currency to withstand the pressure of US–European sanctions, uses the Japanese yen
in some settlements to strengthen Russian-Japanese economic and trade relations,
and holds gold assets in order to maintain international reserves.

Decrease in the share of the US dollar in foreign exchange reserves. Until March
2018, the share of the US dollar in the foreign exchange reserves of the Central Bank
was 43% ~ 48%. With the tightening of anti-Russian sanctions, the Central Bank of
Russia began gradually to reduce it in favor of other currencies and gold. On April
26, 2021, Russia approved the purchase of Chinese government bonds denominated
in yuan by the National Welfare Fund and included the yuan in the list of investable
currencies for the Fund. Prior to this, the list of investable foreign currencies for the
Fund included only seven positions i.e. US dollars, euros, pounds, Australian dollars,
Canadian dollars, Swiss francs, and Japanese yen. The assets of the National Welfare
Fund of Russia account for approximately 7% of Russia’s gross domestic product
(GDP). Prior to the addition of Chinese government bonds to the list, the Russian
National Welfare Fund was only allowed to invest in government bonds from 17
countries, including the US, Australia, Germany, Japan, Switzerland and Canada.
Thus, the Chinese security became the 18th investment government bond. According
to the Central Bank of the Russian Federation, the share of the yuan in Russia’s
foreign exchange reserves increased from 2.8 to 14.4% by the end of 2018; the share
of currency and US dollar assets in Russia’s international reserves decreased to
21.2% by the end of 2020, while the ratio of gold and yuan increased to 23.3 and
12.8%, respectively. At present, the Russian Central Bank is probably the largest
investor in Chinese government bonds available to foreigners, with nearly a third of
its total holdings denominated in yuan.

Russia’s sale of US Treasuries. In October 2010, US debt held by Russia hit a record
high of 176.3 billion US dollars, making Russia one of the top ten investors in
America’s Treasury bonds. After the outbreak of the Ukrainian crisis, Russia began
to accelerate bond sales. In the 18 months since 2017, Russia has reduced its
holdings of US Treasury bonds from 96 billion US dollars to 8 billion, a 90% drop.26
According to the US Treasury, in February 2021 Russia almost completely
abandoned long-term US Treasury bonds (only 306 million US dollars remained).
Russia sold 94% of the peak amount of US bonds it used to hold.27

Expanding non-US dollar funding channels. Under the sanctions, it is difficult for
Russian businesses to obtain funding or trade in US dollars. In order actively to
expand financing channels, Russia has been preparing to issue sovereign bonds in
yuan since 2014 and has formulated the relevant regulations. Russian banks and
energy companies have started looking for financing in international financial centers
such as Hong Kong, Singapore, and Shanghai.

Increase in gold and foreign exchange reserves. While significantly reducing its
holdings of US debt, Russia has steadily increased its holdings of gold.28 Since 2000,
Russia’s gold reserves have increased five times, and in five years, starting from
2014, they have doubled. As of July 2022, Russia’s gold reserves are 2298.53 tons.29
Since the second half of 2019, Russia has slowed down the accumulation of gold
reserves. On the one hand, its foreign exchange reserves were gradually restructured
to a reasonable level. On the other hand, Russia, as an oil exporter, may face liquidity
pressure due to falling world fuel prices, and will not further increase its gold
reserves. Nevertheless, Russia purchased 158.1 tons of gold in 2019 and 8.1 tons in
January 2020. On April 1, 2020, the Russian Central Bank announced that it would
suspend the purchase of gold on the domestic precious metals market, and in the
future, its policy in this regard will be determined in accordance with the conditions
of the international market.

At the same time, gold production in Russia is also significantly increasing.

According to the Russian Federation of Gold Miners, Russian domestic producers
have mined 2189 tons of gold over the past decade. Russia currently ranks third in
the world in terms of gold production after China and Australia, and gold miners plan
to double their output, making Russia the second largest gold producer in the world.

In addition, unlike other countries in the world that store their gold in the United
States, all Russian gold is stored in the vaults of the Central Bank of Russia in
Moscow.30

Currency swaps31and local currency transactions. In recent years, the international

currency swap has become a new monetary mechanism. Russia is seeking to sign
various currency swap agreements with countries such as Iran, Turkey, China, etc.
This will allow it to trade with other countries in local currency instead of US
dollars.

Based on the currency swap, Russia is also actively promoting bilateral settlements
and payments in local currency. In October 2019, the Russian Ministry of Finance
announced that it had signed an agreement with the Turkish Ministry of Finance on
settlements and payments in national currency. India and Russia have started
cooperation in this area. Iran and Russia have signed bilateral currency agreements.
Energy trade between Russia and Iran must be conducted in local currency. Russia is
also committed to promoting local currency settlements in bilateral trade with
countries in the Middle East, Southeast Asia, Latin America, and Africa.

Creation of an internal payment system and a system of financial information

exchange.32Setting up an internal FIX (financial information exchange) system. In
December 2014, the Bank of Russia started developing the SPFS (FMS) (Financial
Messaging Systems), which was regarded as the Russian version of SWIFT. Its
design relies on the SWIFT system, adopting the same standard and interoperability
capable of supporting transaction messages for many currencies. Currently, the main
users of the system in Russia are the Russian Treasury and large banks.

Creation of a proprietary payment system. On December 15, 2015, the Bank of

Russia began issuing the first batch of bankcards supporting its domestic payment
system, namely MIR cards. In the second half of 2017, the Russian government
legislated that new cards issued by banks after July 1, 2017, were to support the MIR
payment system. In July 2020, the State Duma of the Russian Federation additionally
adopted an amendment to the Consumer Rights Protection Law proposed by the
Russian federal government, according to which online merchants in Russia were
required to accept payments with the MIR card from November 1, 2020.

Strengthening international cooperation in the field of the international payment

system. Russia not only seeks to improve the use of the SPFS system by domestic
financial institutions, but also is eager to cooperate with well-known international
financial institutions in the field of payment systems. Russia is currently negotiating
with regulators in China, Iran, and Turkey for linking SPFS with financial
information systems in those countries. Russia is constantly improving the system in
accordance with international standards in order to promote its use by foreign
enterprises. In June 2019, during the SCO summit, Putin put forward an initiative to
create conditions for settlements in the national currency and strengthen cooperation
between the SPFS and Chinese and Mongolian financial institutions. India expressed
its intention to strengthen cooperation with SPFS. On September 17, 2019, the
Central Bank of Iran confirmed that Iran and Russia were to create a bank settlement
mechanism between the two countries in order to “bypass” the SWIFT system and
avoid US and European sanctions.

MIR cards can be used for payments throughout Armenia, Abkhazia and in many
parts of Belarus, Kazakhstan, Kyrgyzstan, Uzbekistan, and Turkey. The Bank of
Russia has strengthened cooperation with the Chinese cross-border international
payment system (CIPS) in yuan, jointly issuing MIR-Union Pay cards.

In addition, Russia, China, and India are exploring electronic payment methods in