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Russia stashed away billions before invading Ukraine. China may have helped hide it


Days after Russia invaded Ukraine, the U.S. and its allies punched back.


PRESIDENT JOE BIDEN: Together, along with our allies, we are right now enforcing powerful economic sanctions.

SHAPIRO: As President Biden explained in the State of the Union address earlier this month, the West was targeting Russia's largest banks and its central bank.


BIDEN: Making Putin's $630 billion war fund worthless.

SHAPIRO: Well, worthless may be an overstatement because a new investigation finds that Russia may have stashed tens of billions of dollars of that war fund in offshore accounts and that China may be helping. Benn Steil is director of international economics at the Council on Foreign Relations, and he wrote about his research in Foreign Affairs. Welcome.

BENN STEIL: Thank you for having me, Ari.

SHAPIRO: I think people are generally familiar with how offshore accounts work, but tell us about how Russia may be using them in this case.

STEIL: Yeah. So the reason we got interested in this is that back in 2018, there had been media headlines saying that Russia had dumped nearly all of its holdings of U.S. Treasury bonds. And my co-author and I, Benjamin Della Rocca, we were very skeptical about this because countries need U.S. dollars to pay their international debts.

SHAPIRO: So you thought maybe they weren't dumped, just hidden.

STEIL: Exactly. So we began digging through various databases, starting with the Russian central bank, and found that the Russian central bank had not, in fact, sold all these securities. So we went looking for where they could possibly be housed at the time, and we found that it was likely that about half the total or about $20 billion was in the Cayman Islands and about $25 billion was in Belgium.

SHAPIRO: If the money was in Belgium, what role did China likely play here?

STEIL: Right. Well, at the same time that we saw this spike in Treasury holdings in Belgium, we also saw anomalous financial data from Russia's central bank. We saw an enormous increase in currency and deposits held at foreign central banks. So what we believe happened based on the evidence was that Russia deposited tens of billions of dollars of foreign currency with the Chinese central bank. The Chinese central bank used this money to buy U.S. dollars, and then they used those U.S. dollars to buy U.S. Treasury bonds, which are being housed, we believe, in Belgium at a custodial bank called Euroclear. So if we're right, that would indicate that Russia has upwards of $80 billion of U.S. Treasury securities that it can turn into ready money, U.S. dollars, at a moment's notice.

SHAPIRO: Are there steps allies could take to close these loopholes?

STEIL: Well, in the short term, it would probably be difficult. And the reason I say that is this - almost certainly whatever entity Russia used to buy these Treasury securities, they were being intermediated by yet more entities, probably, we believe, Chinese state-owned banks. So what we believe is that the U.S. Treasury, in conjunction with U.S. allies, is probably going to have to take further action to assist institutions like Euroclear in understanding what its customers are doing to facilitate transactions for others.

SHAPIRO: Sounds like if China wanted to cut off Russia, it has a lot of power here.

STEIL: Oh, without question. If China wanted to cut off these evasive flows, it could. So it's very important that the Biden administration continue to keep up the pressure on China to get Vladimir Putin to reverse his brutal aggression in Ukraine.

SHAPIRO: Benn Steil is director of international economics at the Council on Foreign Relations. Thanks a lot.

STEIL: Thank you for having me, Ari. Transcript provided by NPR, Copyright NPR.

Ari Shapiro has been one of the hosts of All Things Considered, NPR's award-winning afternoon newsmagazine, since 2015. During his first two years on the program, listenership to All Things Considered grew at an unprecedented rate, with more people tuning in during a typical quarter-hour than any other program on the radio.
Christopher Intagliata is an editor at All Things Considered, where he writes news and edits interviews with politicians, musicians, restaurant owners, scientists and many of the other voices heard on the air.
Linah Mohammad
Prior to joining NPR in 2022, Mohammad was a producer on The Washington Post's daily flagship podcast Post Reports, where her work was recognized by multiple awards. She was honored with a Peabody award for her work on an episode on the life of George Floyd.