In Russia, Western Sanctions Prompt a Run on a Sovereign Wealth Fund

October 17, 2014 by Craig Mellow

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The Russian Federation’s National Wealth Fund is statutorily mandated to backstop the country’s pension system, and it looks well suited to the purpose, with $83 billion socked away under the watchful eye of the Ministry of Finance. The Wealth Fund and its sister Reserve Fund, which is designated to cover budget shortfalls, are the fruits of the macroeconomic discipline imposed throughout the 2000s by ex–Finance minister Alexei Kudrin and continued by his successor, Anton Siluanov, who assumed the post in 2011. Together, the funds hold $173 billion in rainy-day money for a nation with a population of 142 million. But Russia’s military aggression in Ukraine and the resulting economic sanctions from the European Union and the U.S. threaten to undermine this edifice. The Wealth Fund started leaking money last year, before Russia’s invasion of Crimea, when the government approved its use to finance several billion dollars’ worth of…

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