The White House froze the property of the Russian authorities in the United States: what else is in the new sanctions

The United States has imposed new sanctions on Russian individuals and organizations. Also, the sovereign debt of Russia fell under the sanctions. The edition told in more detail with the BBC.

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The sanctions targeted 32 individuals and organizations. These include:

• persons who in the past or are currently involved in the technological, military and related sectors of the Russian economy;
• persons who in the past or are currently acting in the interests of the government of the Russian Federation with the aim of cyberattacks or interference in democratic processes in the United States or in other countries;
• persons involved in international corruption;
• persons who have committed murder or harmed the health of US citizens or US allies;
• persons who infringe on the national security, political stability or territorial integrity of the United States, its allies and partners.

The sanctions list also includes high-ranking officials:

• in the government of the Russian Federation, government agencies or other structures;
• in the structures involved in the aforementioned activities;
• in structures that are directly or indirectly controlled or managed by the Government of the Russian Federation .

In addition, the spouses or adult children of the persons involved in this sanction list are on the sanctions list.

10 Russian diplomats will be expelled from Washington. Moscow said that "the response to the sanctions will be inevitable."

Against public debt

The White House announced the imposition of sanctions. US President Joe Biden signed a decree prohibiting US financial institutions from participating in the purchase of Russian sovereign bonds on the primary market.

Among other things, the US Treasury Department has banned participation in the placement of ruble and non-ruble bonds on the primary market. These are bonds issued after June 14, 2021 by the Bank of Russia, the National Wealth Fund or the Russian Ministry of Finance. It is also prohibited to provide these structures with loans in rubles or other currencies.

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The US government, if necessary, also has the right to extend sanctions to the Russian national debt.

“The government will expand sovereign debt sanctions against Russia if necessary,” the White House said in a statement.

“There is no reason why the American people should directly fund the Russian government when the Putin regime repeatedly tries to interfere with our sovereignty,” a White House official commented on the introduction of the restriction, writes Voice of America.

“All of these forces will have a significant impact on growth and inflation in Russia,” he added. The official admitted that theoretical calculations of the impact of sanctions on the Russian government bond market have not been carried out, but cited the example of 2014, 2015 and 2019, “when such events showed that the departure of American investors from the primary market has a broad cooling effect.”

Until this point, only one sanction had been applied to Russia’s national debt: since August 2019, American investors have not been able to participate in initial placements of sovereign Eurobonds. The directive does not prohibit working on the secondary market of Russian government debt even now.

Restrictions on operations with Russian bonds denominated in rubles will disconnect Russia from the borrowing market, Anders Aslund, an expert from the Atlantic Council, is convinced.

“In the short term, sanctions against the issuance of Russian government bonds in the primary market will have a small impact,” Aslund explains, “but they will be significant in the long term, when Russia will not be able to borrow, more marginally, on the international market. She will not be able to introduce fiscal incentives and so on.”

Marshall Fund expert John Rudolph believes the current sanctions against Russian government bonds are limited, and the White House analogy with 2014 is incorrect. Then, according to the expert, American investors were scared off from the Russian market by oil prices, and the general feeling of escalation, as well as the fact that operations in the secondary market were also banned.

For cyberattacks

The sanctions targeted six Russian technology companies that, according to the Department of Finance, provided support to the cyber program of the Russian intelligence services, including expert advice, software development and the provision of a technical base to facilitate malicious activities in cyberspace.

“We will continue to hold Russia accountable for its malicious actions in cyberspace, such as the SolarWinds incident, using all available policy measures and powers,” it said.

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The cyberattack on SolarWinds in the United States was called the largest in history and was linked to Russia. Also on the black list were several Russian companies supplying software for law enforcement and government agencies, including Positive Technologies.

In addition, sanctions were imposed on several news sites for their coverage of election interference. The American authorities associate them with the Russian special services.

Expel diplomats

The US Department of the Government has imposed sanctions on 32 legal entities and individuals who, according to Washington, were trying to influence the US presidential elections in 2020 at the direction of the Russian government, as well as carried out other actions of disinformation and interference.

Eight individuals and legal entities “associated with the ongoing Russian occupation and repression in Crimea” fell under the new sanctions.

US expels 10 employees of the Russian embassy in Washington. Among them are representatives of the Russian intelligence services.

The White House said in a statement that the United States wants relations with Russia to be stable and predictable, but Washington will defend national interests and respond to the actions of the Russian government aimed at causing harm to the United States.

"The response to sanctions will be inevitable"

“We have repeatedly warned the United States about the consequences of its hostile steps, which dangerously increase the degree of confrontation between our countries. Such a course does not meet the interests of the peoples of the two leading nuclear powers,” Russian Foreign Ministry spokeswoman Maria Zakharova commented on the sanctions.

She noted that during a recent conversation between US President Joe Biden and Russian President Vladimir Putin, the American leader "expressed interest in the normalization of Russian-American relations."

“But his administration’s actions suggest otherwise. The United States is not ready to put up with the objective reality of a multipolar world that excludes American hegemony; they rely on sanctions pressure and interference in our internal affairs. Such aggressive behavior will certainly receive a decisive rebuff,” Zakharova promised.

According to her, "the response to the sanctions will be inevitable."

“Washington must realize that they will have to pay for the degradation of bilateral relations. Responsibility for what is happening lies entirely with the United States,” she warned.

The Foreign Office has summoned US Ambassador Joan Sullivan.

Are sanctions against public debt dangerous?

The ruble did not react in any way to the fact of the announcement of new US sanctions.

Russia attracts external financing mainly in the form of bonds, in which European and American investors invest. According to the Russian Ministry of Finance, as of March 1, the country's total external public debt amounted to $56,6 billion, of which $38,2 billion is debt on bonds. These securities are bought by Russian and foreign investors.

Russia as a whole has a small total public debt. The Accounts Chamber estimated at the end of February that in 2020 it reached 17,8% of GDP - 18,99 trillion rubles. The Ministry of Finance, in a commentary to the department’s report, called 2020 “extraordinary in terms of the volume of government borrowing.”

According to the law on the federal budget, the Russian authorities are going to continue to increase the national debt, but at a slow pace: by 2024, according to the forecasts of the Ministry of Finance, it will reach 21,4% of GDP.

Publicly, even before the sanctions were imposed, the Russian authorities argued that the restrictions would not have a very strong impact on the Russian economy. Economic Development Minister Maxim Reshetnikov said that the share of Western investors in OFZs is about 23%, so a change in this indicator is not capable of greatly complicating the financial situation in the country.

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“Sanctions on Russian government debt, by and large, are a punishment for Western investors... Some fluctuations, of course, are possible, but fundamentally this will not affect anything,” says the head of the economic department.

Finance Minister Anton Siluanov stated that Russia will finance all current expenses in the event of sanctions being imposed on the state debt. “Then we will negotiate with our financial institutions, first of all, of course, with commercial banks, we will interact with the central bank so that the Central Bank solves liquidity issues and helps such financial institutions,” he said.

The sanctions did not affect the participation of American financial institutions in the secondary market for Russian government debt.

“If these are sanctions on new issues, then, in principle, the effect will not be very significant, simply because the share of non-residents has been declining in recent years,” believes Natalia Orlova, chief economist at Alfa Bank.

What else were you preparing for

Another set of sanctions was being prepared regarding the Nord Stream 2 pipeline. We are talking about the pipeline construction operator, Nord Stream 2 AG, as well as the project’s insurer and a number of other related organizations.

US Secretary of State Anthony Blinken previously demanded that companies participating in the Nord Stream 2 project stop working, noting that any organization that is involved in the construction of the pipeline risks falling under sanctions.

“As various US administrations have said, this pipeline is a Russian geopolitical project designed to divide Europe and weaken European energy security,” Blinken said.

Analysts believe that although the sanctions on the pipeline may frighten investors, the construction of the Nord Stream will most likely not be stopped.

“Despite the sanctions, Gazprom is gradually solving the task of completing Nord Stream 2 on its own - a second pipe-laying vessel has joined the project. We view this news positively,” said BCS Global Markets analysts.

At the same time, Claudia Kemfert, an energy expert at the German Institute for Economic Research, argued that in Europe today there are LNG terminals that are not used at full capacity, and this infrastructure is enough to cover the gas demand.

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