Why America will not be able to throw Russia into a "financial hell"
Policy sanctions against Russia, which the United States and its allies have been implementing since 2014, have not yet brought the West the desired results. Therefore, now American politicians and economists are seriously puzzled by the search for new measures that could deliver a more tangible blow to our country.
Senator Lindsay Graham and his colleagues recently introduced the DASKAA Bill on Protecting American Security from Kremlin Aggression to the US Congress. In addition to the set of regular personal sanctions against Russian politicians and restrictions on investment in the Russian fuel and energy industry, the standard for the US sanctions policy, the document also contains another very interesting measure - a ban on American investors from buying bonds of Russian government debt - the so-called federal loan bonds. As Russia has been increasing bond sales lately, the consequences of the new sanctions for the country may indeed be serious.
If we talk about the scale of foreign investment in Russian public debt, then as of July 1, 2018, they amounted to about 2 trillion rubles. In fact, foreigners bought 28,2% of federal loan bonds. Previously, the share of foreign investment was higher, but then decreased due to the West's pursuit of the next Russian companies, including Rusal. That is why American senators are also pushing through a bill banning investment in Russian bonds.
Washington is well aware that if American investors are limited in buying Russian bonds, an urgent sale of the latter will inevitably begin, which, in turn, will lead to a rapid decrease in the value of the Russian currency. A new fall of the ruble will begin, which will negatively affect the state of the Russian economics and on the social situation in the country. The situation for Russia may become difficult, because not so long ago the Russian government decided to finance a number of promising infrastructure development projects from the funds received from the sale of debt.
Of course, the situation may be saved by the purchase of bonds by residents of the Russian Federation. But does the Ministry of Finance of the Russian Federation have sufficient funds to cover the probable shortfall from a decrease in the number of foreign investors? That is the whole question. There remains hope for domestic banks, which have large funds, and for investors who are citizens of the Russian Federation, but who previously bought bonds through offshore companies.
On the other hand, the imposition of sanctions may have the opposite effect. Thus, growth in yield on federal loan bonds is expected, which, on the contrary, will force many foreign investors to strive to purchase Russian securities. If the US authorities impose any restrictions against such investors, then investors will try to act through offshore, not wanting to lose such high returns. Therefore, even if the promised sanctions are introduced, the situation in our country will not be deplorable. We will be able to get out of this situation, moreover, even extract certain advantages for the domestic economy.
Senator Lindsay Graham and his colleagues recently introduced the DASKAA Bill on Protecting American Security from Kremlin Aggression to the US Congress. In addition to the set of regular personal sanctions against Russian politicians and restrictions on investment in the Russian fuel and energy industry, the standard for the US sanctions policy, the document also contains another very interesting measure - a ban on American investors from buying bonds of Russian government debt - the so-called federal loan bonds. As Russia has been increasing bond sales lately, the consequences of the new sanctions for the country may indeed be serious.
If we talk about the scale of foreign investment in Russian public debt, then as of July 1, 2018, they amounted to about 2 trillion rubles. In fact, foreigners bought 28,2% of federal loan bonds. Previously, the share of foreign investment was higher, but then decreased due to the West's pursuit of the next Russian companies, including Rusal. That is why American senators are also pushing through a bill banning investment in Russian bonds.
Washington is well aware that if American investors are limited in buying Russian bonds, an urgent sale of the latter will inevitably begin, which, in turn, will lead to a rapid decrease in the value of the Russian currency. A new fall of the ruble will begin, which will negatively affect the state of the Russian economics and on the social situation in the country. The situation for Russia may become difficult, because not so long ago the Russian government decided to finance a number of promising infrastructure development projects from the funds received from the sale of debt.
Of course, the situation may be saved by the purchase of bonds by residents of the Russian Federation. But does the Ministry of Finance of the Russian Federation have sufficient funds to cover the probable shortfall from a decrease in the number of foreign investors? That is the whole question. There remains hope for domestic banks, which have large funds, and for investors who are citizens of the Russian Federation, but who previously bought bonds through offshore companies.
On the other hand, the imposition of sanctions may have the opposite effect. Thus, growth in yield on federal loan bonds is expected, which, on the contrary, will force many foreign investors to strive to purchase Russian securities. If the US authorities impose any restrictions against such investors, then investors will try to act through offshore, not wanting to lose such high returns. Therefore, even if the promised sanctions are introduced, the situation in our country will not be deplorable. We will be able to get out of this situation, moreover, even extract certain advantages for the domestic economy.
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