(Bloomberg) -- Squeezed by ever-expanding U.S. sanctions, Vladimir Putin says he wants to dump the dollar. His central bank has been doing just the opposite.
In comments to lawmakers on Tuesday after his inauguration for a record fourth term as president, Putin said a “break” from the U.S. currency is necessary to bolster Russia’s “economic sovereignty,” especially in light of recent penalties and what he called politically motivated restrictions on trade.
“The whole world can see that the dollar’s monopoly is precarious and dangerous for many,” he said. “Our gold and currency reserves are being diversified, and we’ll continue to do that further.”
The numbers tell a different story. According to the central bank’s latest data, the dollar’s share in its international reserves climbed to nearly 46 percent in 2017 from just over 40 percent the previous year. Meanwhile, the euro accounted for almost 22 percent, sliding from more than 32 percent in 2016 and as high as 43.8 percent in 2009. The stockpile was at $459.9 billion in April, the highest since 2014.
Putin doesn’t have much to show for years of decrying the “dollar monopoly” that allows the U.S. to act like a “parasite” on the global economy. Now he has to contend with a deepening standoff with the U.S. after the latest round of sanctions in April ripped through Russia’s currency and stocks and cut off a major company’s access to Western financial markets.
Iran’s experience doesn’t set a very good precedent. While it’s curbed its dollar usage and now receives payment for most oil sales in euros, that doesn’t offer much protection after President Donald Trump pulled the U.S. from the nuclear deal.
Putin acknowledged this week that since oil trades in dollars, “we are thinking of what needs to be done to free ourselves from that burden.”
When it comes to diversifying Russia’s reserves, Putin did have a point. In recent years, the central bank added holdings of yuan as well as Canadian and Australian dollars, which together made up almost 7 percent of the total at the end of last year. It’s also been buying gold, bringing its fraction to over 17 percent in 2017.
What’s more, the dollar’s share in the global reserves is still far ahead of Russia’s at almost 63 percent in the fourth quarter of 2017, according to the International Monetary Fund. The euro accounted for about 20 percent, a level that may not be too far off for Russia.