China has long been suspected of holding bonds overseas to protect it from scrutiny and engaging in what the United States considers illegal currency manipulation. Would Russia do the same?

Steil told me he thought so. He believes the Russian central bank made deposits with the PBoC, which in turn ordered Chinese state-owned banks to buy US Treasury bonds on deposit in Belgium and the Cayman Islands.

If Steil’s financial research is correct, Russia could have at least $80 billion in dollar assets scattered in offshore accounts that no one knew about.

If Moscow needs greenbacks, Chinese banks could sell their Treasury holdings, hand over the dollars to the PBoC which would credit them to the Russian central bank’s account.

With so many intermediaries, and as long as China’s central bank is willing to play along, it would be very difficult for US or European financial authorities to do anything about it. President Xi Jinping has publicly stated that financial sanctions are “harmful to all parties” and that this form of financial boilerplate would be a way for Beijing to help Moscow under the table.

This is not the only hole in the financial net the West has thrown at Russia in recent weeks. Earlier this month, the Russian government was able to make interest payments on its sovereign debt through US banks.

It is possible that Washington authorized this because it was concerned about the repercussions of a Russian default on the global financial system.

Western governments are also continuing to pay for Russian oil and gas imports – although Moscow has started to require such payments to be made in rubles, which could potentially help prop up the currency.

On Wednesday, Germany indicated they were considering rationing petrol in case neither team backed down before the deadline for that particular chicken game at the end of the week.

Western financial sanctions against Russia were executed with lightning speed and extraordinary coordination. But their effectiveness is now being tested. In recent days, the ruble has recovered much of the ground it had lost since the invasion.

The financial sanctions that have been imposed on Russia are certainly causing economic harm to the country. “But we shouldn’t kid ourselves that the Kremlin’s neck is in a financial noose,” Steil says.

“If we’re right about the money flows we’ve been tracking, the Russian central bank has at least $80 billion in treasury bills – as well as renminbi and gold – that it could liquidate to pay its debts. invoices without too much difficulty.”

We could be for the long haul.

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Source: www.telegraph.co.uk
This notice was published: 2022-03-31 05:00:00