Russian exporters are accumulating significant amounts of foreign currency abroad after the authorities lifted mandatory requirements of repatriating and selling export FX cash, Kommersant daily reported citing a study by the Institute of International Finance (IIF).

The reports of FX cash stacked abroad highlight the policy dilemma facing the CBR and the Ministry of Finance as to how to manage currency flows and their effects on the ruble under sanctions.

The analysis of the Central Bank of Russia (CBR) data shows that “other investments” abroad by Russian residents in 2022 jumped by $146bn, attributed to the placements of FX cash by Russian companies in current accounts and deposits abroad, as well as an increase in trade loans.

"The question remains unclear as to where the claims on foreign countries accumulated as a result of the growing current account surplus are located," the report by IIF commented as cited by Kommersant. The total CA surplus in 2022 stood at the record-high $285.8bn.

The IIF estimates that out of that, $58bn remained in the accounts of eurozone banks, while another $87bn could be held in the other developing economies and in particular China. This is in line with previous reports by Bloomberg that Russian exporters were able to stash a “shadow reserve” of $80bn abroad in 2022. 

The analysts previously surveyed by Bloomberg on the subject warned that such FX holdings abroad are vulnerable to being targeted in future sanction rounds. Other experts suggested to Bloomberg that such “shadow reserves” can be formally turned to the state’s benefit in a variety of ways, such as tapping exporters with one-time extraordinary taxations.