Reserves Plummet After Intervention

APPresident Dmitry Medvedev welcoming ministers and businessman to an economic meeting Thursday in the Kremlin.
The country's international reserves, the world's third largest, fell $8.9 billion last week as investors continued to pull money out of Russian financial markets and the Central Bank intervened to prop up the ruble.

The value of the reserves declined to $573.6 billion in the week to Sept. 5, after rising $1 billion to $582.5 billion the previous week, the Central Bank said in a statement Thursday.

"The main reason for the drop is that the Central Bank sold currency on Thursday and Friday to support the national currency," said Yevgeny Nadorshin, a senior economist at Trust Investment Bank. The Central Bank sold about $3.5 billion Sept. 4 and $1.5 billion the following day, he added.

"Panic was created by its declines."

The ruble has weakened about 2.4 percent against a basket of dollars and euros since Russia invaded neighboring Georgia on Aug. 8, prompting an outcry from the West.

The Central Bank's net foreign currency sales in the first 10 days of September amounted to $5.3 billion, the bank's first deputy chairman, Alexei Ulyukayev, said Thursday.

First Deputy Central Bank Chairman Alexei Ulyukayev told reporters in Moscow that Russia sold "several" billion dollars this month to support the ruble. Last week's drop was due to "central bank operations" and currency fluctuations, he said.

Sergei Ignatyev, chairman of the Central Bank, said the country had enough resources to boost refinancing operations several times over and had no plans to widen the ruble's trading band against the basket.

"As far as the situation on the currency market is concerned, the Central Bank is in full control," Ignatyev said.

(Bloomberg, Reuters)