patrick.net

Since the beginning of a new stage of the Russian-Ukrainian war, Russia's gold and foreign exchange reserves have decreased by 102.5 billion dollars. Their reduction on average per month amounted to 13.7 billion dollars, which is close to the lower estimate of the average monthly military spending in Russia, repeatedly reproduced by the author of these lines (about 500 million dollars a day, or 15 billion dollars a month).

From February 18, the last date of the weekly CBR report on the state of international reserves before the start of the current stage of the Russian-Ukrainian war, to September 30, 2022, Russia's reserves have decreased by almost 16%. It should be noted that last September, for the first time in the entire period of this war, the reduction of Russian reserves took place at double-digit rates for such a long time - for five weeks in a row.

However, even this rate of reserve drawdown understates the dramatic nature of Russia's international reserves over the past seven and a half months. The fact is that the sanctions imposed by the US, EU, UK, Canada, Switzerland, and other countries against Russian reserves managed to “freeze” a significant part of them, while at the same time making the other part less liquid.

As of February 18, 2022, all international reserves of Russia amounted to 643.2 billion dollars. How much international reserves in liquid form does the Kremlin have now? There are three basic estimates of the amount of reserves subjected to a "freeze" and, accordingly, the amount of liquid reserves.

1. According to the Minister of Finance A. Siluanov and the head of the Central Bank E. Nabiullina, the sanctions have blocked Russian reserves in the amount of about 300 billion dollars.

2. Deputy Minister of Economy of Ukraine D. Kudin estimated the amount of arrested reserves at 415 billion dollars.

3. Since Russia's funds in the SDR ($24.1 billion as of February 1, 2022) and in the reserve position in the IMF ($5.2 billion) cannot be freely used outside this international financial institution, and transactions with Russian gold ($132.3 billion) were also sanctioned by Western countries, which made Russian gold reserves liquid only at a certain discount, then the volume of reserves that became limitedly liquid can be estimated at some intermediate level between the two above values .

Taking into account the reduction from February 18 to September 30 of the liquid part of international reserves by 102.5 billion dollars. it is possible to offer several options for estimating the size of liquid Russian international reserves as of the last date - 240 billion dollars, 125 billion dollars. or, for example, 198 billion dollars.

Depending on the option for assessing the frozen part of reserves, the rate of reduction of the liquid part of Russian international reserves is:
- if we accept the assessment of Siluanov-Nabiullina, then about 30%;
- if we accept Kudin's assessment, then about 45%;
- if you use an intermediate estimate, then approximately 34%.

Russia's liquid international reserves according to the Siluanov-Nabiullina estimate:



Depending on the option for assessing the frozen part of the reserves and while maintaining the rate of reduction of all reserves reached in the last seven and a half months at the level of 13.7 billion dollars. per month, Russian liquid international reserves will be exhausted within 18, 9 or 14 months, respectively.

It seems that not only the fact of exhaustion of liquid international reserves, but also the very approach to it makes the continuation of hostilities by the Kremlin less likely.

It also appears that the rapid decline in Russia's liquid international reserves over the past seven and a half months has forced Putin to radically rethink his strategy* for the current war and launch an unprecedented campaign of international pressure to force the victim of his aggression into a ceasefire and start a negotiation process.