The Russian government has drastically reduced their holdings of United States Treasury bonds, with Russian ownership of U.S. bonds declining from $96.1 billion in March to $48.7 billion in April—and then further reducing their holdings to just $14.9 billion in May; an 11-year low.

A gradual Russian sell-off of U.S. sovereign debt began in 2011 and has intensified over the years as Washington has continued to impose sanctions against Russia. To put the massive sell-off into perspective, in 2010, Russia was among the top 10 holders of US Treasuries at $176.3 billion.

The Treasury released a list of 33 countries on Tuesday, which included the biggest holder, China, which held $1.2 trillion of US debt in May. Russia was not on the list, as there is a $30 billion threshold for inclusion on the Treasury Department’s monthly report of major sovereign debt holders.

A U.S. Treasury bond is a fixed-interest government debt security with a maturity of more than 10 years. Treasury bonds make interest payments twice a year.

Elvira Nabiullina, director of the Central Bank of Russia (CBR) said in May that the dramatic reduction of U.S. Treasury holdings was a result of the systematic risk assessment, which included financial, economic and geopolitical risk, according to RT.

In turn, Russia has been buying large amounts of gold during its gradual sell-off of U.S. Treasury bonds, and it recently overtook China as the world’s biggest holder of gold with $80.5 billion worth.

The global head of debt and rates strategy at ING, Padhraic Garvey, said that for Russia it equated to “moving from a safe asset to an ultra-safe asset,” in reference to the move from U.S. Treasury bonds to gold.

To be clear, the impetus for the move from Treasury bonds into gold coincides with a desire to breakaway from the hegemony of the U.S. petrodollar and the global dollar-based payment systems.

Over 60 percent of global reserves and 80 percent of global payments are currently denominated in U.S. dollars, according to James Rickards, author of Currency Wars.

The reason gold is so critical is that it cannot be manipulated by U.S.-based economic warfare, as it cannot be frozen out as other forms of digital and paper fiat can be.

Gold can simply be loaded onto pallets and shipped to another state to make a payment, thus bypassing targeted economic sanctions that are often used by the United States as a means of attempting to force geopolitical compliance by Russia and other countries. The strategic significance of gold is so great, that even when oil prices and Russian financial reserves were collapsing in 2015, they continued to acquire gold.

Additionally, the U.S. is the only country with veto power at the International Monetary Fund, known as the global lender of last resort. Thus, one of the most crucial weapons wielded by Russia, in its war to free itself from the hegemony of the petrodollar, is gold.

With the petrodollar being utilized as a weapon by the U.S. in a time of increased economic warfare, gold is a clearly a means of bypassing U.S. sanctions.

“Gold is an asset that is independent of any government and, in effect, given what is usually held in reserves, any Western government,” said Matthew Turner, metals analyst at Macquarie Group in London.“This might appeal given Russia has faced financial sanctions.”

With the recent launch of Chinese Yuan-denominated oil futures, and more sanctions being imposed on Russia—one can’t help but wonder if this rapid sell-off of U.S. Treasury holdings was meant as a test of sorts to assess the potential impact of a rapid Chinese liquidation of Treasury bonds. (For more from the author of “Russia Dumps Almost All U.S. Bonds Due to ‘Geopolitical Risk,’ Buys Billions in Gold” please click HERE)

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