Why is the French State a good client of the Central Bank of Russia?

Astonishing observation, in the 2022 report of the Central Bank of Russia (BCR):  as for several years, France is the second country in the world where the most financial reserves of the BCR are located. This is outside of Russia itself, where its 2,300 tons of gold, worth an estimated 116 billion euros, are essentially stored.

Remember that the Central Bank is both the brain and the lungs of the Russian banking and monetary system. It issues the ruble and ensures its stability, lends to commercial banks, sets interest rates between banks and fights against inflation. And it is she who, since February 24, has been trying to avoid the complete collapse of the Russian economy and the finances of the Kremlin.

12.2% of BCR assets in France

Led by a brilliant economist, former adviser to Vladimir Putin, Elvira Nabioullina, the Russian Central Bank was very fond of France before the February sanctions. And France gave it back to him. No less than 12.2% of the BCR’s assets are housed in France, against 13.8% in China. And only between 10% and 2.8% for the seven other significant countries, all allies of the United States.

The United States was the first place of domiciliation of the BCR’s currencies before Vladimir Putin and his nationalist friends became annoyed by the fact that Russia, low in debt, placed its holdings in American Treasury bonds, which amounted to financing the Washington’s chronic budget deficit. The first place being held recently by China, France is now the first Western country preferred by the BCR, ahead of Japan (10%) or Germany (9.5%).

The United States, yet great masters of the dollar, queen currency of international trade and currency reserves, are now half as important in the landscape of the Russian central bank (6.6%). This is followed by the United Kingdom (4.5%), Austria (3%), Canada (2.8%) and an undifferentiated group of other states (10.7%).

What exactly are these Russian assets in France? It is likely to be mostly government debt, so-called bonds, issued by the French state,”says Julien Vercueil, economist and specialist in Russia.

A debt of 2,800 billion euros

These bonds, the French State in place each week to finance its debt, with the thousand major international investors.

These investors are other States, public and private banks, investment funds, insurance companies, large companies. Although already highly indebted, France guarantees, thanks to its good international reputation, a certain interest rate over a period fixed in advance, on average eight years.

Last year, the state issued $285 billion in bonds to satisfy its ever-increasing borrowing appetite. These have increased its debt to just over 2,200 billion euros. With that of local authorities and social security, the considerable French public debt now reaches 2,800 billion.

Just under half is held by non-French investors. How much and what exactly is in the hands of Putin’s Russia financial arm? The France Trésor agency, which issues the bonds and manages the State debt, ensures unable to provide these details​.

22 billion euros of fixed assets

And is justified as follows: the bonds, once offered by France Trésor to the network of large private banks mandated to do so, are bought and resold on a so-called secondary market, by tens of billions of euros each week. It invites us to question the Banque de France.

who hasn’t no information to communicate. ​As for the Directorate General of the Treasury, the financial personification of the State, it proposes to question… the Banque de France. But ends up all the same by bringing some laconic precisions.

The French State, in addition to the freezing of property belonging to oligarchs for nearly 800 million, has immobilized 22 billion euros of assets of the Russian central bank”. Interest due to Russia is well disbursed by the state, but are then frozen within the banks that host the titles. They are therefore not paid to the BCR. The Treasury adds that Russian foreign exchange reserves s are well invested in debt securities, but not only in government debt”.

Classified as “confidential”

What else? And besides, would there be other Russian assets which would explain that the 22 billion seized do not correspond to the French 12.2% of the reserves of the BCR, themselves estimated at 578 billion euros? Mystery. The detail is confidentialopposes the Treasury.

Nor will we know how much the French state borrowed from Russia after it stole Crimea from Ukraine in 2014. Whatever the amount, it was authorized: then, the international sanctions, however already “unprecedented”, did not concern the Russian central bank. We weren’t down to serious business yet.

Why is the French State a good client of the Central Bank of Russia?

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