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Russian National Wealth Fund

From Wikipedia - Reading time: 11 min

Russian National Wealth Fund
Native name
Фонд национального благосостояния России
IndustrySovereign wealth fund
Founded2008
Total assets$130.8 bn (February 2024) [1]
Websiteminfin.gov.ru/en/key/nationalwealthfund/
National Wealth Fund, 2008–2017, with the blue line showing the nominal value in billion USD and the amber line showing the nominal value in billion RUB

The Russian National Wealth Fund (Russian: Фонд национального благосостояния России) is Russia's sovereign wealth fund. It was created after the Stabilization Fund of the Russian Federation was split into two separate investment funds on 30 January 2008. The National Wealth Fund (NWF) is controlled by the Russian Ministry of Finance.

History

[edit]
The rainy-day Reserve Fund is used to buffer the national budget, which is strongly tied to the price of crude oil

The two funds were the Reserve Fund (SFRF), which was invested abroad in low-yield securities and used when oil and gas incomes fall, and the National Wealth Fund, which invests in riskier, higher return vehicles, as well as federal budget expenditures.[2] The SFRF was given $125 billion and the NWF was given $32 billion. The SFRF was exhausted by 2017. It had been depleted by budget deficits and the low oil prices. The SFRF was emptied by the end of 2017,[3] and therefore ceased to exist, leaving the NWF as the sole reserve fund of the Russian Federation.

In October 2008 the NWF was permitted to invest in shares on the Moscow Exchange or Saint Petersburg Stock Exchange, to support the country’s financial markets by buying shares in Russian companies, until December 2009. Support was also provided from the NWF to Russian banks, making the NWF a “lender of last resort” to banks.[4]

One of the fund's main responsibilities is to support the Russian pension system,[5] but since the closure of the SFRF the NWF also funds budget deficits.

Once the NWF's liquid assets exceeds 7% of GDP, the Government can spend money from the NWF, as it proposed to do in 2020 in order to fund infrastructure projects.[6]

The budget for 2022 set an oil price of $44.2 per barrel, with the NWF receiving money if the price was over the set price and selling assets to support the government budget if the price was lower. In 2023 this was changed to set an annual target of $8 trillion rubles revenues from oil and gas, anything below that seeing funds being taken from the NWF to support the budget, anything above being added to the NWF.[7] As it turned out, the revenue in 2023 was 8.8 trillion rubles.

Previously holding liquid assets in US dollars, Euros, UK Pounds, Yen, Yuan and Gold, the NWF began selling some Sterling and all the US dollars in the summer of 2021,[8] whilst buying Yuan to reach 30% and Euros to reach 40%, Sterling and Yen each at 5% and Gold 20% of the liquid fund value. After the start of the Russian invasion of Ukraine, management then decided to close the Euro holdings. It aimed to achieve this before the end of 2023 in favour of Chinese yuan, which would be limited to 60% of the fund value, with gold limited to 40% of the liquid fund value.[9]

Following the Russian invasion of Ukraine in 2022 1 trillion rubles ($10 billion) was ordered to be invested by the NWF in shares from Russian companies to support the stock markets and aid Russian firms.[10] In January 2023 changes were proposed to allow "anti-crisis" investments to be made, with a cap of 4.25 trillion rubles ($61.24 billion) on these investments, irrespective of liquidity levels in the Fund which at that date stood at $87.2 billion, or 4.6% of GDP.[11]

On 27 December 2022 expenses of the NWF were limited in 2023-2025 to 8 trillion rubles ($114 billion) while the investment strategy changed to invest only in Chinese yuan.[12]

Funds in the NWF are composed of liquid assets and long term investments. In December 2022 long term investments stood at 4.3 trillion rubles, with liquid assets at 6.1 trillion rubles.[13]

For 2024, Russia changed the funding rules again, so that the NWF will not receive the expected 2024 11.5 trillion rubles of oil revenue, which will go directly to the Russian budget instead, with just 1.8 trillion rubles projected to be being given to the NWF in 2025.[14] The rules also changed to recover the 2023 surplus that had been paid to the NWF, so that from late 2023 the central bank restarted dealing in currencies in the NWF, to sell the budget adjustment of 2023, where 11.8 billion rubles will be sold daily until 28 June 2024. Currencies would also be sold/bought for the expected 2024 budget adjustment based on a set $60 per barrel from oil sales, expected to account for an average of 0.8 billion rubles in sales per day.[15][7] This will reduce both the fund value and the liquid assets by around 2.3 trillion rubles by the end of 2024. The 2024-6 budget expects the NWF to hold a reduced 11.1 trillion rubles at January 2025 and 13.0 trillion at January 2026.[16]

In November 2024, the NWF was made up of a total of 13 trillion rubles ($133.7 billion), of which 5 trillion were liquid assets, mostly in yuan and gold.[17]

The NWF decreased its holdings of gold over the course of 2024 from 358.9 tons of the metal on 1 January 2024 to 187.7 tons on 31 December 2024, a reduction of 48% over the year.[18]

Major changes in NWF value

[edit]
  • In the second half of 2019, the effect of an OPEC+ agreement to increase oil prices resulted in Russia receiving a high level of revenues, allowing 4.04 trillion rubles ($65.1 billion) to be added to the NWF.[19]
  • In 2020, despite COVID-19 effects on the economy the NWF values increased by 50%, helped by high oil prices, and a surplus in the Russian budget in 2019.[20]
  • In 2022, with very high oil prices, additional funds would normally have been added to the Fund, however with the cost of the war with Ukraine, in October $16.2 billion was withdrawn from the $127.9 billion liquid portion of the NWF.
  • In 2023, the budget deficit in December 2022 of 3.8 trillion rubles (€49.4 billion)[21] and the effect of the 2022 Russian crude oil price cap sanctions required $38.1 billion to be withdrawn, with further withdrawals expected in 2023 as a result of the continuing sanctions over crude oil.

Major reductions in NWF liquid assets

[edit]
Withdrawals
Date billions of $ reason Ref.
April 2020 28.3 to refloat 50%+1 shares of Sberbank [20][22]
June 2020 12.5 to cover budget deficit [23]
March 2022 10.0 to buy Russian company shares [24]
October 2022 16.2 to cover budget deficit [25]
January 2023 38.1 to cover budget deficit [26]
March 2023 7.0 to cover budget deficit [27]
Through 2023 12.0 to support airlines and purchase leased aircraft [28][29]
December 2023 32.9 to cover budget deficit [30]
December 2024 48% gold to cover budget deficit [18]

Overview

[edit]

The National Wealth Fund will receive funds from investment returns and any excess funds from oil and gas revenues.[5] The existence of the NWF helps with the credit rating for Russia, by providing a reserve to provide "resilience to short-term shocks".[31]

According to the Russian Ministry of Finance, the foreign debt securities the fund can invest in must have credit ratings of AA− or higher by Fitch or Standard & Poor's, or a rating of Aa3 by Moody's.[5] Despite this, the fund agreed to buy (on 17 December 2013) $15 billion of Ukrainian Eurobonds, despite the fact that Ukraine had lower credit ratings at the time.[5][32][33]

The NWF stands out from other global funds with it gathering investments into the national economy itself instead investing everything overseas, so it can provide a boost to the slow modernization of Russian infrastructure in a time of otherwise anemic investment. Other countries like Indonesia are following the Russian example in running a National Wealth Fund it is reported in 2020.[5] Of course, because of a lack of a real "hard currency" reserve, the fund can quickly lose value in a case of internal crisis.

In 2013, the NWF invested 150 billion rubles into the Trans-Siberian Railway and the Baikal-Amur railway.[34]

The NWF approved the investment of $4.2 billion into the state's nuclear energy corporation Rosatom in June 2014. Another $4.2 billion was invested into the Russian Direct Investment Fund, which used a portion for two regional internet connection projects in December 2014. In December 2014, the NWF invested in VTB, Gazprombank and Rosselkhozbank equity. An additional 30-year deposit was made by the NWF to help the VTB bringing the total investment to $5.5 billion.[2]

In 2016, NWF had invested $2.6 billion in the Yamal LNG plant.[35]

In 2020, NWF bought 50% +1 share in Sberbank from Russia's Central Bank.[36]

Starting from 2024, the NWF will invest $3.2 billion in an $11.2b project to build 600 civilian aircraft which will be sold to airlines at a below cost price.[37]

There was an increase in oil and gas revenues in the first four months of 2024, but the Russian Ministry of Finance still reported that the NWF funds were use to cover profit shortages.[38]

Fund composition

[edit]

All numbers are in billion, unless specified otherwise; the numbers with "worth" in parentheses are the equivalent in US Dollars:

Date Total USD Includes EUR Includes GBP Includes JPY Includes CNY Includes RUB Includes gold Includes other non-liquid assets Source
1 February 2022 $177B 38.56B (worth $41B) 4.17B (worth $5B) 600.30B (worth $4B) 226.70B (worth $30B) 142.1B (worth $2B) 405.70 tons (worth $28B) $67B [39]
1 November 2023 $146B 3.66B (worth $4B) . . 279.77B (worth $37B) 0.26B (worth $0B) 508.26 tons (worth $33B) $72B [40]
1 January 2024 $133B . . . 227.33B (worth $31B) 1.514B (worth $1B) 358.96 tons (worth $25B) $76B [30]

Size of the fund and historic numbers

[edit]

Source by the Ministry of Finance of Russia:[41]

National Wealth Fund value
Date billions of $ billions of ₽ % of GDP liquid
assets ₽b 		Ref.
1 February 2008 32.000 783.3 1.9% 783 [41]
1 January 2009 87.970 2 584.4 6.3% 2 584 [41]
1 January 2010 91.560 2 769.0 7.1% 2 769 [41]
1 January 2011 88.440 2 695.5 5.8% 2 695 [41]
1 January 2012 86.790 2 794.4 4.6% 2 794 [41]
1 January 2013 88.590 2 690.6 4.0% 2 690 [41]
1 January 2014 88.630 2 900.6 4.0% 2 900 [41][42]
1 January 2015 78.000 4 388.0 5.3% 4 388 [41][42]
1 January 2016 71.720 5 227.1 6.1% 5 227 [41][42]
1 January 2017 71.870 4 359.1 4.7% 4 359 [41][42]
1 January 2018 65.150 3 752.9 3.6% 3 752 [41][42]
1 January 2019 58.100 4 036.0 3.7% 4 036 [41][42]
1 January 2020 125.560 7 773.0 7.3% [42]
1 January 2021 183.360 13 545.6 11.7% 8 659 [43]
1 November 2021 197.750 13 945.0 12.1%
1 February 2022 174.900 13 610.2 10.2% 9 730 [39]
1 August 2022 201.000 12 155.0 9.1% [44]
1 October 2022 187.900 10 792.0 8.1% 7 873 [45]
1 January 2023 148.400 10 434.5 7.8% [46][47]
1 February 2023 155.300 10 807.6 7.2% [48]
1 March 2023 147.200 11 106.4 7.4% 6 450 [49][50]
1 April 2023 154.500 12 281.9 7.9% 6 710 [51][50]
1 May 2023 162.000 12 475.6 8.3% 6 820 [52]
1 June 2023 153.100 12 356.7 8.2% 6 640 [53]
1 July 2023 145.580 12 670.2 8.4% [54]
1 August 2023 146.300 13 313.0 8.9% 7 183 [55]
1 September 2023 142.800 13 704.0 9.1% 7 252 [56]
1 October 2023 140.106 13 648.0 9.1% 7 140 [57]
1 November 2023 146.310 13 541.0 9.0% 6 930 [40]
1 December 2023 151.129 13 432.9 9.0% 6 740 [58]
1 January 2024 133.407 11 965.0 8.0% 5 010 [30]
1 February 2024 130.800 11 922.0 6.6% 4 900 [1]
1 March 2024 135.000 12 258.0 6.8% 5 045 [59]
1 April 2024 135.700 12 530.0 7.0% 5 088 [60]
1 May 2024 139.600 12 750.0 7.1% 5 172 [61]
1 June 2024 142.000 12 700.0 7.1% 5 046 [62]
1 July 2024 146.960 12 600.0 7.0% 4 603 [63]
1 August 2024 142.580 12 300.0 6.4% 4 665 [64]
1 September 2024 133.416 12 166.0 6.4% 4 854 [65][66]
1 October 2024 137.922 12 787.1 6.7% 5 255 [66]
1 November 2024 131.130 12 730.0 6.6% 5 447 [67]
1 December 2024 121.560 13 097.0 6.8% 5 792 [68]
1 January 2025 116.840 11 880.0 6.2% 3 810 [69]
1 February 2025 122.090 11 970.0 5.6% 3 751 [70]
1 March 2025 135.470 11 880.0 5.5% 3 394 [71]
1 April 2025 140.400 11 750.0 5.5% 3 269 [71]
Date billions of $ billions of ₽ % of GDP liquid
assets ₽b 		Ref.

Sanctions

[edit]
Main article: International sanctions during the Russo-Ukrainian War

Following the 2022 Russian invasion of Ukraine, several countries imposed economic sanctions on Russian banks, individuals and companies. On 22 February 2022, United States President Joe Biden announced new restrictions on activities involving the National Wealth Fund.[72] The EU adopted sanctions in its 10th package in February 2023.[73]

Assets in June 2023 include €9 billion that is frozen in foreign banks by sanctions.[74]

See also

[edit]

References

[edit]
  1. ^ a b "Russia's Russia's National Wealth Fund totals $130 bln as of February 1 — Finance Ministry". 12 February 2024.
  2. ^ a b "Russia's 'Anti-Crisis' National Wealth Fund: An Overview". The Moscow Times. 6 February 2015. Retrieved 20 December 2024.
  3. ^ "Reserve Fund runs dry". 29 January 2018.
  4. ^ Raymond, Hélène (2011). "Sovereign Wealth Funds as domestic investors of last resort during crises". Économie Internationale (3): 121–159. doi:10.3917/ecoi.123.0121. Retrieved 13 April 2023.
  5. ^ a b c d e Ukraine bailout could derail Putin's drive to boost Russian economy, Financial Times (18 December 2013)
  6. ^ "Russia proposes $15.7 bln spend from National Wealth Fund in 2020-2022". Reuters. 2 December 2019.
  7. ^ a b "The Russian Federation Is Introducing A Mechanism For Transferring Excess Profits From The Oil And Gas Industry To The Budget". 11 January 2024.
  8. ^ "Russia to convert around $40 bln from National Wealth Fund, says Accounts Chamber head". 10 June 2021.
  9. ^ "Russia to remove euro from National Wealth Fund". 9 February 2023.
  10. ^ "Russia to spend up to $10 billion from rainy-day fund on buying Russian shares, source says". Reuters. 1 March 2022.
  11. ^ "Russia Eyes End to Liquidity Caps on Wealth Fund 'Anti-Crisis' Spending". 26 January 2023.
  12. ^ "Russia to replenish National Wealth Fund in yuan from 2023 — Finance Ministry". 27 December 2022.
  13. ^ "Russian economy in 2022. Adaptation and a growing budget gap". 16 February 2023.
  14. ^ "Russia to make extra $17.7 bln in energy revenues available to budget next year". Reuters. 25 September 2023.
  15. ^ "Russian Central Bank To Resume Currency Trades in 2024". 27 November 2023.
  16. ^ "State Duma passes Russia's 2024-2026 federal budget". 17 November 2023.
  17. ^ "No backup plan: The liquidity of Russia's National Wealth Fund could dry up in months if oil prices crash". The Insider (in Russian). Retrieved 3 January 2025.
  18. ^ a b https://uatv.ua/en/more-than-100-tons-of-gold-have-disappeared-from-putin-s-piggy-bank-the-russian-national-welfare-fund-the-moscow-times/. {{cite news}}: Missing or empty |title= (help)
  19. ^ "Effect from OPEC+ deal was main cause of NWF doubling in 2019 — wealth fund". 22 January 2020.
  20. ^ a b "Russia's relative resilience: Why Putin feels vindicated by the pandemic". 17 December 2020.
  21. ^ "War unbudgeted for". 29 January 2023.
  22. ^ https://www.reuters.com/article/markets/russian-finance-ministry-buys-50-of-sberbank-from-central-bank-idUSL5N2BY0WO/. {{cite news}}: Missing or empty |title= (help)
  23. ^ "Better Armed to Handle the Shock". Retrieved 13 April 2023.
  24. ^ "Russia to Spend up to $10 Billion From Rainy-Day Fund on Buying Russian Shares, Source Says". 1 March 2022.
  25. ^ "Russia raids wealth fund to cover country's budget deficit". 20 October 2022.
  26. ^ "Russia rainy day fund shrinks by $38 bln as government plugs deficit". Reuters. 18 January 2023.
  27. ^ "Russia's National Wealth Fund up $7 bln to $154.5 bln in March - finmin". Reuters. 5 April 2023.
  28. ^ "European economy". 28 December 2023.
  29. ^ "Russia splashes $12 billion to keep aviation sector in the air". Reuters. 21 December 2023.
  30. ^ a b c "Russia's National Wealth Fund totals $135 bln as of January 1 — finance ministry". 17 January 2024.
  31. ^ "Russia: This annex refers to the release of the rating action of 29 October 2021". 29 October 2021.
  32. ^ Russia cuts Ukraine gas price by a third, BBC News (17 December 2013)
  33. ^ Ukraine to issue Eurobonds; Russia will purchase $15 bln, says Russian finance minister, Interfax-Ukraine (17 December 2013)
  34. ^ "RF Government orders to allocate RUB 150 bln from NWF for BAM and Transsib". Portnews. 7 November 2013. Retrieved 20 December 2024.
  35. ^ "Yamal LNG: an economic project under political pressure". 4 August 2016.
  36. ^ "Сбербанк могут продать без закона". Газета Коммерсантъ. Retrieved 11 November 2015.
  37. ^ "Russia to invest $9.7 bln in 2023 prices in project to build over 600 civilian aircraft". 15 January 2024.
  38. ^ "Russia's revenues from oil and gas increased by 82% compared to last year". Ukrainska Pravda. Retrieved 3 January 2025.
  39. ^ a b "Russian National Wealth Fund down by $6.8 bln in February 2022, says ministry". 24 March 2022.
  40. ^ a b "Volume of National Wealth Fund reaches $146.31 bln as of November 1". 3 November 2023.
  41. ^ a b c d e f g h i j k l m "Ministry of Finance Russia, STATISTICS". Retrieved 25 December 2019.
  42. ^ a b c d e f g "Russian Economy in 2019 Trends and Outlooks (Issue 41)" (PDF). Retrieved 14 April 2023.
  43. ^ "The volume of the Russian National Wealth Fund tops $183.93bn as gold overtakes dollar asset for first time". 15 January 2021.
  44. ^ "Russian National Wealth Fund up almost $23 bln in July to over $200 bln, ministry says". 8 August 2022.
  45. ^ "Russia's National Wealth Fund increased by 582 bln rubles in Oct to 11.37 trln rubles, liquid part at 5.9% of GDP". 8 November 2022.
  46. ^ "Russia's National Wealth Fund at $148 billion at Jan 1 - Finance Ministry". euronews. 19 January 2023.
  47. ^ "Russia | National Wealth Fund: Total Amount | CEIC". www.ceicdata.com. Retrieved 18 March 2023.
  48. ^ "Russia | National Wealth Fund: Total Amount | CEIC". www.ceicdata.com. Retrieved 18 March 2023.
  49. ^ "Russia | National Wealth Fund: Total Amount | CEIC". www.ceicdata.com. Retrieved 18 March 2023.
  50. ^ a b "Russia's National Wealth Fund up $7 bln to $154.5 bln in March - finmin". Reuters. Retrieved 3 January 2025.
  51. ^ "Russia's National Wealth Fund up $7 bn to $154.5 bln - finance ministry". 5 April 2023.
  52. ^ "Russia's National Wealth Fund totals $162 bln as of May 1 — finance ministry". 5 May 2023.
  53. ^ "Russia National Wealth Fund edges down to $153bln on June 1". 2 June 2023.
  54. ^ Ministry of Finance (20 July 2023). "Volume of the National Wealth Fund".
  55. ^ "NWF stands at $146.3 bln as of August 1 — Russian Finance Ministry". 4 August 2023.
  56. ^ "Russia's National Wealth Fund up 390 bln rubles to 13.704 trln rubles in Aug, liquid assets 4.8% of GDP". 6 September 2023.
  57. ^ "Russia's National Wealth Fund down 55.3 bln rubles to 13.65 trln rubles in Sept, liquid assets 4.8% of GDP". 5 October 2023.
  58. ^ "Russia's National Wealth Fund totals around $150 bln as of December 1 — finance ministry". 12 December 2023.
  59. ^ "Russia's National Wealth Fund totals $135 bln as of March 1 — finance ministry". 10 March 2024.
  60. ^ "Volume of National Wealth Fund reaches $135.7 bln as of April 1, 7% of 2024 GDP forecast". 6 June 2024.
  61. ^ "Russia's National Wealth Fund totals $139.6 bln as of May 1 — finance ministry". 6 June 2024.
  62. ^ "Russia's National Wealth Fund totals $142 bln as of June 1 — ministry". 6 June 2024.
  63. ^ "Volume of Russia's National Wealth Fund reaches $146.96 bln on July 1 — Finance Ministry". Archived from the original on 4 July 2024.
  64. ^ "Russia's National Wealth Fund reaches around $142.58 bln as of August 1".
  65. ^ "Russia's National Wealth Fund contracts by 111.7 bln rubles to 12.166 trillion rubles rubles in Aug". 4 September 2024.
  66. ^ a b "Russia's National Wealth Fund exceeds $130 bln as of October 1 — ministry". Archived from the original on 6 October 2024.
  67. ^ "NWF amounts to $131.13 bln as of November 1 — Russian Finance Ministry". TASS. Retrieved 13 November 2024.
  68. ^ "Russia's National Wealth Fund totals 13 trillion rubles as of December 1 — ministry". TASS. Retrieved 7 December 2024.
  69. ^ "Минфин: объем ФНБ на 1 января составил 11,88 трлн рублей (Russian)". TASS. Retrieved 16 January 2025.
  70. ^ "Volume of Russia's National Wealth Fund reaches $122.09 bln of February 1". TASS. Retrieved 9 February 2025.
  71. ^ a b "Volume of Russia's National Wealth Fund reaches $140.4 bln as of April 1". TASS. Retrieved 7 March 2025.
  72. ^ "Fact Sheet: United States Imposes First Tranche of Swift and Severe Costs on Russia". The White House. 22 February 2022. Retrieved 23 February 2022.
  73. ^ "EU adopts 10th package of sanctions against Russia". 20 March 2023.
  74. ^ "Russia sells gold and yuan from its National Wealth Fund to finance budget deficit". 5 June 2023.
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