Bloomberg: Russia’s export oil & gas profit helped save its economy

Russia’s high profits from the sale of key export commodities, including oil and gas, have allowed the country’s economy to survive in the face of large-scale international sanctions, Report informs referring to Bloomberg.

The National Clearing Centre has seen its foreign-exchange holdings surge this year, according to people familiar with its operations. A key link in the gas trade, it has so far avoided the US and European sanctions that have hit the central bank and Russia’s major lenders.

Much of the money at NCC, which is held on behalf of Russian banks and their clients, is in yuan, shifted out of dollars and euros and other “unfriendly” currencies at the behest of the central bank, the people said, speaking on condition of anonymity to discuss matters that aren’t public. Smaller unsanctioned lending institutions also have seen holdings in yuan and other foreign currencies jump, the people said.

Russia’s ability to blunt the blow of sanctions thanks to the continuing inflow of cash from energy and other exports has frustrated officials in the US and Europe seeking to isolate it from their financial systems after the Kremlin invaded Ukraine on February 24. Sanctions imposed shortly after that on the Bank of Russia cut off the usual place where those funds accumulated. But with energy prices surging, the inflow continued unabated. Against that backdrop, the NCC’s holdings have exploded.

“The NCC doesn’t have money of its own. This is all the banks’ money, more precisely their clients’ money, that they put in the NCC because it can conduct payments in dollars” since it has correspondent accounts with US banks, said Oleg Vyugin, who was chairman of the board at the Moscow Exchange until June 2022 and before that a top official at the central bank and Finance Ministry. Many Russian lenders lost their own such accounts as a result of sanctions.

“After there were rumors that the NCC would be sanctioned, the bulk of the dollars were converted to yuan,” he said. The Chinese currency is down about 12% against its US counterpart this year.

Just how much money the NCC, whose full name is Central Counterparty National Clearing Centre JSC, now holds isn’t clear. Since the sanctions froze about $300 billion in the Bank of Russia’s reserves after the war broke out, authorities have stopped disclosing all but the most general information about Russia’s holdings.