Why Russia keeps money in the USA

Фото: Depositphotos

In March, 2017, the Russian authorities invested 13,5 billion dollars in US government bonds and brought the total amount of investments in this asset to about 100 billion, which is about 25% of Russian foreign investments.

Why Russia keeps a significant part of its money in the securities of the country, with which it is in rather tense relations, found out “Новая газета".

Economist Andrei Movchan noted that such a decision was dictated by a simple pragmatist: those who do not want to go bankrupt invest in the USA.

“Regardless of how we feel about sanctions and Trump, we know that 45% of global transactions are in dollars, and the American economy is today the most powerful in the world. And its growth is the fastest - not in percentages (they are often misleading), but in real dollars per capita, which the economy adds every year. Plus, the American economy is the most stable: its fluctuations are the easiest to predict,” Movchan said.

He added that the policy of building up US foreign debt is also beneficial for investing countries.

“The United States is increasing its external debt portfolio, using it to cover the budget deficit... For them, this is a policy of provoking growth: “at the expense of external debt, we will return to you more than you gave in taxes. Tomorrow you will produce even more, we will return this money, borrow again, and so on.” This policy today allows American society to consume more than it produces, but it is also the most important factor in maintaining positive dynamics in conditions of extremely low inflation and refinancing rates close to zero. One can argue about the long-term consequences of this situation, but today this model seems to be the most thoughtful. Therefore, from the point of view of who to lend money to, the United States is the number one choice,” the economist explained.

Movchan added that for all the economic benefits of Russian investments in the US economy, there are political risks in this decision, especially due to the growing tension between the two countries and sanctions against Moscow - there is a risk that Russian investments will simply be arrested in the form of another round of sanctions.

“Theoretically, there is such a risk (of arrest of Russian investments), but the arrest of reserves paralyzes the foreign economic activity of the state and is impossible as an isolated measure - only in combination, in particular, with an embargo on Russian exports: if this happens, the importer will not be able to pay for the first a tank of Russian oil that will go abroad... On the other hand, the arrest of reserves is an extraordinary measure, which in recent history has been used a couple of times against completely cannibalistic regimes. Russia does not yet rank (in the American table of ranks) among the most terrible countries, such as North Korea, or simply terrible countries, like Iran. Rather, it is perceived as a country that is disturbing and wrong. Therefore, sanctions against Russia are still rather decorative, more like moral pressure and reporting to one’s voters,” the economist believes.

He clarified that the arrest of reserves and the imposition of an embargo are possible if the country actively sponsors international terrorism and directly threatens America.

Movchan also denied the popular conspiracy theory that Russia is sponsoring the US economy by buying American public debt, although it could invest this money in its own country.

According to him, the purchase of American securities is carried out by the Central Bank of Russia at the expense of reserve funds. A pThe reserves are mainly growing due to the excess of the amount in the currency received for export over the amount in the currency spent on import.

“That is, reserves are not the funds of the Central Bank, they are, roughly speaking and without taking into account the specifics, the funds of some exporters. And two reasons immediately become clear why it makes no sense to talk about using reserves for investment in your country. Firstly, if such investments were needed (that is, someone in Russia would need to import goods or services beyond what is already happening), then those who need these investments would take funds in rubles and buy If they had currency, like other importers, and imported imports without even asking the Central Bank, the reserve would have decreased without any decision to change the rules for operating with it. If this does not happen, it means either there is no demand, or there are funds, but funds not “from reserves,” but normal ones, expressed in rubles,” he explained.

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