Russia Pulls a Major Move! Completely Abandons the US Dollar, Euro, Pound Sterling, and Japanese Yen, Severing Ties with Western Currencies, and De-Westernizing Its Currency. The Russian Sovereign Wealth Fund Now Only Holds Renminbi, Rubles, and Gold. Europe is Stunned by the News; Japan Almost Faints in the Bathroom Upon Hearing This! What Exactly Happened?

On February 9th, local time, Russian Deputy Finance Minister Kolychev announced that this year, the Ministry of Finance will clear out the Euro holdings in the National Wealth Fund, retaining only gold, rubles, and renminbi. The Russian National Wealth Fund is designed to support the national pension system and can also be used to cover budget deficits during crises.

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What is the current situation of the Russian Sovereign Wealth Fund's currency structure? In July 2021, the US dollar was completely eliminated, with a current presence of 0% in the Russian Sovereign Wealth Fund. The Pound Sterling's proportion was reduced to 5%, while the Euro and Renminbi proportions were increased to 39.7% and 30.4%, respectively, with the Japanese Yen's proportion at 4.7% and gold bullion at 20.2%. The high proportion of the Euro, close to 40%, is mainly determined by the special status of Russia's economic and trade relations with Europe. For instance, before the outbreak of the Russo-Ukrainian conflict, the largest export destination for Russian natural gas was Germany, accounting for 19.19%, followed by Italy with 10.38%, France with 7%, and Poland with 4.18%... The proportion of Russian exports to developed European countries reached as high as 63.21%. According to relevant data, the proportion of Russian oil exports to Europe is 50%. Under these circumstances, it is only natural for Russia to hold a higher reserve of Euros.

However, after the outbreak of the Russo-Ukrainian conflict, Western countries have kicked Russia out of the international funds clearing system (SWIFT) and have prohibited the use of US dollars and Euros for settlement, and the proportion of Russian natural gas exports to Europe has dropped to a single-digit percentage. At this point, it is timely for Russia to clear out Euros, Pounds Sterling, and Japanese Yen in its Sovereign Wealth Fund, as they cannot be used even if held.

Russia has been on the path of de-dollarization for several years. From clearing out US dollar assets to eliminating Pound Sterling and Japanese Yen assets, and now not wanting Euros either, the Russian National Wealth Fund has taken another step on the road to de-Westernizing its assets.

Due to Russia's low GDP share globally and relatively small trade volume, the impact on the international currency status of the US dollar, Euro, Pound Sterling, and Japanese Yen after severing ties with the Western monetary system is not significant. Currently, the US dollar and Euro account for 80% of international settlement reserves, and the US dollar, Euro, Pound Sterling, and Japanese Yen account for over 90%. Therefore, it is quite difficult to shake the global hegemony and absolute dominant position of Western currencies.

Russia's complete severance with the Western monetary system is greatly beneficial to the Renminbi. Under Russia's demonstration effect, it will significantly promote the internationalization of the Renminbi. Previously, the Russian Ministry of Finance announced a new legal asset structure for the Russian National Wealth Fund, raising the upper limit of Renminbi holdings to 60% (previously 30%), and the upper limit of gold holdings to 40%, with the balance of Pound Sterling and Japanese Yen accounts being zeroed out.

Just now, the People's Bank of China and Brazil signed a Memorandum of Cooperation to establish a Renminbi clearing arrangement in Brazil. This will be beneficial for enterprises and financial institutions of China and Brazil to use Renminbi for cross-border transactions, further promoting the facilitation of bilateral trade and investment, and gradually moving away from the situation of relying solely on the US dollar for international settlement, clearing, and investment currencies.