UPDATE 2-Russian National Wealth Fund to abandon all assets in U.S. dollars

(Adds detail, analyst comment)

ST PETERSBURG, June 3 (Reuters) – Russia’s National Wealth Fund (NWF) will sell off all its U.S. dollar assets, increasing the share of its holdings in euros, Chinese yuan and gold, Finance Minister Anton Siluanov said on Thursday, with the changes expected within a month.

Russia has gradually reduced its dollar holdings since the imposition of Western sanctions following Moscow’s annexation of Crimea in 2014, and has sought to partially decouple from the Western financial system.

“Like the central bank, we have decided to reduce investments of the NWF in dollar assets,” Siluanov said at the St Petersburg International Economic Forum (SPIEF).

After the changes, the fund will hold 40% of its assets in euros, 30% in yuan and 20% in gold. The Japanese yen and British pound will account for 5% each, Siluanov said.

The move implies selling $40 billion in favour of gold, yuan and euro, ING said.

Russia’s NWF, which accumulates Russia’s oil revenue and was initially designed to support the pension system, stood at $185.9 billion as of May 1. It forms part of Russia’s gold and FX reserves that totalled $600.9 billion on May 27.

The move to ditch U.S. dollars from the National Wealth Fund will not affect the rouble exchange rate, First Deputy Prime Minister Andrei Belousov said.

The effect of dedollarisation will be determined by whether the central bank replaces dollars with euros or other foreign exchange in the NWF, or if it changes its forex reserve structure, said Tim Ash at BlueBay Asset Management.

Ash said the move was very political and that it was meant to send a signal ahead of a summit between President Vladimir Putin and his U.S. counterpart Joe Biden later this month.

The central bank slashed its holdings of U.S. Treasuries in 2018 and cut the dollar share in its gold and forex reserves in 2020 to 21.2% as of Jan. 1, down from 24.5% a year earlier. The central bank reports that data with a six-month lag.

Russia said on Wednesday it plans to spend up to 400 billion roubles ($5.47 billion) annually from the NWF in a bid to boost state investment in infrastructure projects and finance its development strategy. ($1 = 73.1750 roubles)

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