Russia "Half of Foreign Exchange Reserves Frozen, Debts to Unfriendly Countries to Be Paid in Rubles"

"Unable to Use Due to $300 Billion Freeze"
Repaying Foreign Debt with Plummeting Ruble...Concerns Over Massive Exchange Losses

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The Russian government announced that about half of its foreign exchange reserves have been frozen due to Western sanctions and that it will repay its foreign debt in rubles. If foreign debt repayment is made in rubles, which have been plummeting since Russia's recent invasion of Ukraine, there are concerns about massive foreign exchange losses for Western banks and companies invested in Russia.

On the 13th (local time), Anton Siluanov, Russia's Minister of Finance, said in an interview with the state-owned Rossiya-1 TV broadcast, "Of our total foreign exchange reserves of $640 billion (approximately 791.68 trillion KRW), about $300 billion, roughly half, have been frozen due to Western sanctions and are unusable. Debts owed to unfriendly countries that restrict the use of foreign exchange reserves will naturally be repaid in rubles."

He added, "We consider it absolutely legitimate that we have stated we will not refuse to fulfill our debt obligations and will repay them in rubles until the freezing of foreign exchange reserves is lifted." Earlier, on the 7th, the Russian government designated 48 countries, including the United States, the United Kingdom, Australia, South Korea, Japan, and the European Union (EU), which participated in sanctions against Russia, as unfriendly countries and warned that it is also considering nationalizing the assets of companies from those countries that have withdrawn from Russia.

Minister Siluanov said, "We hold some of Russia's foreign exchange reserves in the Chinese currency, the yuan, and we know that the West is pressuring China to restrict the use of the yuan as well," emphasizing, "Nevertheless, our partnership with China will be maintained, and it will enable us to strengthen cooperation further in a situation where Western markets are closed."

This statement is interpreted as a retaliatory measure against Western sanctions on Russia and serves as a warning that banks and companies invested in Russia could suffer massive foreign exchange losses. Since the ruble's value has significantly dropped before and after Russia's invasion of Ukraine, there are concerns that if the Russian government repays all foreign debt in rubles, major Western investment banks will incur substantial losses.

According to Bloomberg News, before the invasion of Ukraine, the ruble traded between 70 and 80 rubles per dollar, but on the 11th, it plunged to about 135 rubles per dollar in the international foreign exchange market. The Russian government temporarily closed the securities exchange from the 28th of last month and announced that it will not open it this week (14th?18th) as well.

This content was produced with the assistance of AI translation services.