Russian President Vladimir Putin’s effort to defend the ruble and shield citizens from the pain of international sanctions risks further eroding the country’s already shrinking official reserves.

The chart of the day shows reserves shrank to $454.7 on Oct. 3, the lowest since June 2010, just as the Bank of Russia resumed defending the ruble, the world’s worst-performing currency against the dollar in the third quarter. The monetary authority has since spent $1.8 billion to prop up the currency, excluding interventions since Oct. 7, central bank data show.

The European Union and the U.S., who accuse Russia of fomenting Ukraine’s conflict with separatists, imposed sanctions that curbed access to overseas financing and fueled an exodus of foreign capital. The central bank has spent about $46 billion this year, according to the institution’s data, and raised the key interest rate to 8 percent to aid the currency at a time when the economy is faltering.

Ruble defense is “more difficult for the central bank now because it’s not about panic selloffs that tend to be of a passing nature,” said Aleksei Belkin, who helps manage about $4 billion at Moscow-based Kapital Asset Management LLC. “This time, it has more to do with recession fears and a foreign-exchange shortage. The speed at which reserves are being destroyed matters.”

Foreign reserves have shrunk by about $55 billion this year as currency interventions added to the effect of declining gold prices and a weaker euro. At the same time, the ruble lost 18 percent against the dollar, helping to push inflation to a three-year high of 8 percent last month.

Authorities may need to spend as much $30 billion more this year to defend the ruble, according to UralSib Capital estimates. That would bring the annual depletion of reserves to more than $85 billion, or the most since 2008, when they shrank $160 billion from an August peak to the end of that year.

Bloomberg