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On the 28th of February 2022, the US Government banned United States persons from engaging in transactions with the Central Bank of the Russian Federation. The motive was quoted as "to prohibit American dollar transactions with the Russian central bank".

How exactly does banning American individuals from the Russian central bank translate into prohibiting the Russian Central bank from defending the RUB in the foreign exchange market? Given that the forex market is huge and decentralized, why couldn't the Russian central bank simply sell USD and buy RUB to non-American individuals?

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  • $\begingroup$ the answer is US, EU, UK has frozen the holdings that the Russian central bank has with them, however Russia holds alot of Gold and other reserves with China and other banks, the lesson is 1) the weaponization of the dollar and euro by the political class destroys the USD & Euro, 2) buy and hold gold and hard assets at home and diversify your banking as much as possible $\endgroup$
    – HungryHeretic
    May 19, 2022 at 9:18

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Well for one thing they don’t necessarily have cash dollars, they may have Treasury bills or money market deposits. Those need to be liquidated. Banning Americans from doing those transactions certainly makes it harder.

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  • $\begingroup$ I thought I might be missing something since The Russian Central Bank said they were unable to engage in market intervention for the ruble due to US sanctions but alot of people hold US treasuries and US assets all over the world, so how can the US ban trading of those assets worldwide? $\endgroup$
    – HungryHeretic
    Mar 2, 2022 at 2:47
  • $\begingroup$ Part of it has to do with the "plumbing" of the financial sector. You might own a Treasury or a US stock, but it is typically held by a custodian bank. These custodians are now forbidden from transfering assets. Similarly, transactions need to be cleared and settled. Custodian banks and clearinghouses will think twice about engaging in any transactions that can be interpreted as violating the sanctions. $\endgroup$
    – jpfeifer
    Mar 2, 2022 at 12:40
  • $\begingroup$ but forex has no central clearing house, the whole purpose of the sanctions is to stop Russia from defending the ruble, us treasuries and stocks are irrelevant in this case $\endgroup$
    – HungryHeretic
    Mar 2, 2022 at 21:27
  • $\begingroup$ @HungryHeretic consider you have a billion euros and want some dollars, but every bank in the world will tell you to GTFO. How are you going to do the trade? $\endgroup$
    – user253751
    Apr 7, 2022 at 10:00
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The Russian central bank has dollars in accounts at American banks. Now it can't use those dollars to indirectly pay for stuff.

Ordinarily it would like to sell dollars (and euros and yen and ...) for rubles if the ruble's value gets too low. Now it can't do that.

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ok

I found the answer here in this article

https://www.ft.com/content/526ea75b-5b45-48d8-936d-dcc3cec102d8

it details exactly where the Russian central bank is holding its assets.

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    $\begingroup$ You should explain some of the content of the linked article in this answer; if the link rots then this answer will become useless. $\endgroup$
    – Richard Ward
    Mar 3, 2022 at 10:04

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