Over the last month in the U.S. Congress was introduced six bills containing various kinds of sanctions against Russia, including a ban on investment in Russian debt. As a serious threat — understood RBC
Photo: Jonathan Ernst / Reuters
During the time elapsed from the meeting of presidents of Russia and USA Vladimir Putin and Donald trump in Helsinki on 16 July, us lawmakers introduced at least six bills containing economic and other sanctions against Russia. The latest, and most severe, was introduced in Congress on Thursday, 2 August.
As explained by many of the authors of the bills, their appearance was provoked by the behavior of trump at a press conference (he agreed with Putin’s statement of non-participation of Moscow’s intervention in the American elections in 2016) and the closed nature of the meeting between the two leaders. To give explanations on the agenda of the Helsinki summit and its actual outcome in the Capitol was caused by U.S. Secretary of state Mike Pompeo. On 25 July, he assured the senators that U.S. strategy toward Russia has not been revised, including on the issue of sanctions. Legislators, however, his words did not convince.
5 July bills about how to punish Russia
1. Sanctions against Nord Stream 2 (Countering Russian Power Plays Act)
The author is a Democrat, a member of the house of representatives Jared Chapman, date of Deposit 16 Jul.
Provides for sanctions against companies and individuals involved in the construction of the pipeline “Nord stream-2”. According to Huffman, this project is created with the aim to secure for Russia the status of the main player of the European gas market, which “tied the energy stability of U.S. allies in Europe.”
2. Sanctions against financial institutions of Russia due to its actions in Ukraine (Continued Punishing Occupation of Ukraine Act)
The authors — members of the house of representatives Democrat Steve Cohen and Republican Ted By, date of entry to 18 July.
The authors want to compel the President to impose sanctions on at least three of the seven major Russian financial institutions if Moscow will violate the Minsk agreement on the settlement of the conflict in Eastern Ukraine. The proposed list included Vnesheconombank, Sberbank, VTB, Gazprombank, Bank of Moscow, Rosselkhozbank, and Promsvyazbank.
3. Sanctions against American it companies, promoting censorship in Russia (CPR for Russian Civil Society Act)
The author is a member of the house of representatives of USA Congress Democrat Adriano Espiet, date of Deposit — July 18.
Espiar proposes to impose sanctions on leading it companies in the US that supply of Russian equipment to enable authorities to carry out censorship and pressure on the “social activists”. The bill also includes provisions on the introduction of punitive measures against companies and persons involved in sending Russian troops to Syria and Ukraine. The initiative also provides for the extension of civil dialogue between the United States and Russia.
4. The complex of measures to prevent Russian interference in the elections (Secure America from Russian Interference Act of 2018)
The authors — a member of the house of representatives Democrat Steni Hoyer and 37 other congressmen, date of Deposit — July 19.
It is proposed to oblige the Executive authority of the United States to take a range of measures to strengthen the electoral infrastructure in the country. The bill also contains initiatives to identify hidden financial channels through which Moscow allegedly distributing funds for political purposes.
5. A bill requiring the administration to enforce sanctions on the “Magnitsky act” (A bill to <…> ensure appropriate congressional review and the continued applicability of sanctions under the Sergei Magnitsky Rule of Law Accountability Act of 2012)
The authors, senators Ben Cardin and Elizabeth Warren (Democrats) and John McCain (Republican), date of application — 25 July.
The bill proposes to consolidate the guarantees for the implementation of the sanctions imposed against Russia because of the death of Herminage Capital Management lawyer Sergei Magnitsky in 2012, in the already existing law “On combating the enemies of America by sanctions” (CAATSA). It was approved in August of 2017 and enables the us administration to impose strict punitive measures against Russian individuals and companies in a number of sectors including Finance and energy.
“A crushing blow to Russia”
The most serious package of sanctions against Russia contains a bill introduced on 2 August and received the name “Act on the protection of U.S. security from the aggression of the Kremlin” (DASKAA). It was sponsored by the Deputy Chairman of the Senate Committee on foreign Affairs, Democrat Robert Menendez and a member of this Committee, Democrat Lindsey Graham. As co-authors were joined by two Republicans — senators John McCain and Cory Gardner. The full text of the bill has not yet been published, however, on the website of Graham presents its summary.
The authors want to secure the obligation of Washington to support NATO, as well as to make it impossible for the US withdrawal from the Alliance without the consent of two thirds of the senators. European allies, the senators intend to send excess military equipment. Also, the authors of the bill consider it necessary to establish in the Department the division for digital economy and cyber security (in February of this year, who was then Secretary of state Rex Tillerson has called to create such a Department, but it is not). The senators also want to give the U.S. justice Department the right to close down botnets and other digital infrastructure that can be used for illegal purposes.
Traditionally, it is proposed to impose new sanctions against politicians, oligarchs, members of their families, and anyone else who promotes illegal acts that directly or indirectly carried out on the instructions of the Kremlin.
In the economic part of the bill provides for a wide range of measures: a ban on operations with a new sovereign debt of Russia, a ban on the import of uranium from Russia, sanctions on transactions related to investments in energy projects that support the Russian state-owned companies; cancellation of permits to persons from the United States for activities associated with certain oil projects in Russia; sectoral sanctions against Russian entities, capable of malicious actions in cyberspace, the disclosure of ultimate beneficiaries of companies that are buying up expensive real estate, etc.
The existing sanctions regime was not able to achieve the desired results and to change the policy of Moscow, said Senator Graham. He recalled that, as claimed by representatives of the American intelligence community, Russia’s intervention in the internal Affairs of the US continues. “Our goal is to change the status quo and continue to use against Russia, Putin’s crushing sanctions and other measures, yet he does not cease to interfere in the electoral processes in the United States, did not stop the cyber attacks on American infrastructure, does not withdraw Russian forces from Ukraine and stop wreaking havoc in Syria,” Graham said on its website.
Mentioned in DASKAA tougher sanctions any others that still were applied against Russia, stated in an interview with RBC senior analyst of consulting firm AKE Group on issues of political risk, Maximilian Hess.
Resolved the issue
The idea of new sanctions are unlikely to meet serious opposition in Congress, even if Moscow “will decide to publicly announce the cessation of all attempts to interfere in the internal policy of the United States,” said Hess. “Unfortunately, the theme of Russia has become too politically charged. Coupled with the scandals trump, this means that the sanctions bill, likely to be adopted in a fairly short time, as in the case of CAATSA”, — he explained. The first progress on DASKAA worth the wait in September, predicts Hess.
Most likely, DASKAA approved, and indicate that two factors — strong team of writers and the concerns of legislators, called “the continuing intervention of Russia in U.S. policy,” said RBC the expert of American analytical center Atlantic Council Anders åslund. But, “as is always the case with such bills”, before taking DAASKA some of its provisions will be mitigated, said the analyst. “Lobbyists will make great efforts to protect the interests of customers, so that the final text of the bill will be quite different from the present,” agrees Hess.
Moderate reaction of markets
Markets reacted moderately to the news from the United States, the analysts of Raiffeisenbank. Most issues of Federal bonds fell. OFZ yields added 10 b.p. (in particular, the issue 26225 gone above 8%, the issue 26207 — 7,83%), the ruble has weakened by 50 kopecks., to 63.4–63.5 rubles to the dollar.
However, the prospect of sanctions affecting the investors — they get rid of Russian debt securities faster than sovereign bonds of other developing countries. The share of non-residents in Federal loan bonds have fallen six times faster than the average across the 18 markets EM debt, according to data collected by Deutsche Bank AG, cited by Bloomberg.
As DASKAA affect Russia
Until now, the administration trump has opposed sanctions against Russian government debt. The US Treasury explained that the ban on the purchase of new issues of Federal loan bonds (OFZ) will put pressure on economic growth in Russia will increase stress on its banking sector, will force the Russian government to change its economic policy, and ultimately “will lead to retaliation of Russia against U.S. interests” that may reduce the competitiveness of major U.S. management companies.
Russia does not see in the new U.S. bill biggest risks. According to the head of the Central Bank Elvira Nabiullina, the ban on U.S. investment in OFZ able to “provoke some volatility on the debt market,” but will not bring much damage to the economy.
Non-residents withdrew more than $3 billion of OFZ after the April sanctions, estimated by Bloomberg at the end of June. “There is no mass Exodus of foreigners from BFL not observed. The situation is stable”, — said the head of public debt Department of the Ministry of Finance Konstantin vyshkovsky in an interview on July 26.
If approved, the ban on investments in public debt of the Russian ruble against the dollar may weaken, but the dollar will not exceed 65 rubles, said RBC senior analyst BKS Sergey Suverov. Russian indices may fall by 7-8%, since sanctions against the national debt can be added to sanctions against the sectors represented in the stock market.
Limitations against a new state debt of Russia can lead to higher yields by 2 percentage points and the ruble weakening by 5%, analysts at Citi Ivan Chakarov and Artem Zaigrin. Additional sanctions provoked by the outflow of capital, which may ultimately weaken the ruble, they conclude.
Full exit of non-residents of BFL is unlikely, as sanctions, if they accept, first, raised new issues, not old, and secondly, they will be able to continue to buy non-us investors, says Suverov.
Risks associated with new sanctions, are not “destroying” nature, as Russia has one of the lowest debt levels in the world, and $0.5 trillion of reserves through income from the export of hydrocarbons, said RBC economist at Nordea Denis Davydov. However, Russia has a large development programme in the framework of the new may decrees, which involves additional budgetary costs, and the loss of one of the main sources of funding and, more importantly, the conversion of Russian debt into a toxic asset represent a moderately negative factors, the expert concluded.