Vladimir Milov (leader of the opposition party “Democratic Choice)” posted the following statement on his blog today, and I thought it was worth reading and sharing in English. Here is my translation:
Many have commented on this in the past week, but just to summarize:
According to the Central Bank, as of February 1, Russia has $315.8 billion in foreign currency reserves – $12 billion was spent in January (nominally referred to in the above figure, but it includes all sorts of illiquid things such as monetary gold and reserve position in the IMF, which is not easy to convert into cash currency quickly).
Of the $315.8 billion, about $163 billion does not belong to the Central Bank and are on government accounts – these are the Reserve Fund (which contains $85 billion) and the National Welfare Fund (NWF, which has $78 billion), information on the balances in these funds can be found on the Ministry of Finance’s website. These amounts are traditionally included in the overall statistics so that the overall figure of the Russian reserves looks solid, and in principle there is some logic to this – this is really the currency held by the authorities. But there are a couple of important “buts”:
These funds are not available to the Central Bank and may not be used to intervene in the foreign exchange market – they are controlled by the government, and they are designed for entirely different purposes.
At the moment there is a mass processing of applications for the use of NWF money by commercial companies and banks, which collectively exceed the amount of money sitting in the NWF, so that at least a significant portion of this will soon be wasted (it is hard to say how it will impact the paper statements, as it is likely that the accountants will interpret this as “a means of investing in 10-15 year company bonds”, i.e. they will stay on paper, but in reality this money will not be at the disposal of the authorities).
Excluding all of this gold-welfare beauty at the disposal of the Central Bank, there thus remains just between $152-153 billion of currency that can be used to support the ruble on the market.
Is this a lot of a little? For comparison:
In 2008, after 5 months of the crisis (from 1.8.2008 to 01.01.2009) the Central Bank spent $183 billion on the exchange to support the ruble;
Last year alone, foreign exchange reserves decreased by $130 billion;
Only in the last three months (from 1 November 2014) foreign exchange reserves declined by $55 billion.