UNITED STATES, WASHINGTON (OBSERVATORY) — On August 26, the second package of US sanctions against Russia came into force because of the Salisbury incident. Economists have assessed their impact on the Russian economy: sanctions will not harm the country more than trade wars.
A year earlier, the first package of sanctions in the Skripals case came into force: a ban was imposed on the provision of external assistance to Russia, except humanitarian aid, the sale of weapons and the export of dual-use goods and technologies were prohibited.
The second package of US sanctions prohibits US banks from participating in the primary market for Russian ruble denominated sovereign debt obligations, as well as issuing non-ruble loans to the Russian government. Experts interviewed by TASS believe that the new sanctions will not be able to do more harm to the Russian economy than the trade wars, in particular the USA and China, and the volatility in the oil market.
In general, sanctions include countering the provision of loans to Russia, financial or technical assistance to Russia by international financial institutions such as the World Bank or the International Monetary Fund, as well as restricting the export of certain goods and technologies.
“The market has already laid down these factors in asset prices. Thus, the actual start of the new restrictions should not have an additional impact,” economists at Renaissance Capital say.
Much more significant consequences for Russia can be brought by a new round of trade confrontations and lower energy prices.
“The reaction, most likely, if it is, is minimal. First, the wording of the restrictions is very soft and does not force holders to get rid of already bought debt and do not prohibit its purchase or sale on the secondary market. In addition, investors usually react to such things immediately, without waiting for the date of the entry into force of the new restrictions, so that the market has basically won back the new sanctions, “said Vladimir Bragin, Director of Analysis of Financial Markets and Macroeconomics at Alfa Capital.
“The placement of Eurobonds in June was characterized by a significant excess of demand over supply, the first is likely to decrease, but will be supported by domestic market participants. If the Ministry of Finance nevertheless encounters a lack of demand, it can always replace external borrowings with domestic ones. Full the refusal to place Eurobonds in 2020-2021, taking into account the planned volumes, will entail an increase in the annual placement of OFZ bonds by approximately 200 billion rubles, in which case the Ministry of Finance will sell an additional daily 800 million rubles in the domestic foreign exchange market, which, taking into account current volumes, is not so significant, “economists at Renaissance Capital predict.
“The most painful part of the Skripals sanctions implies restrictions on the participation of US banks in the initial floatation of Russian sovereign foreign currency Eurobonds, but the Russian government debt is only 12% of GDP, Russia’s federal budget is in surplus at oil prices of more than $ 50 / barrel, and “the volume of the foreign currency debt market is extremely insignificant. In other words, it cannot be said that the sanctions restrictions on the placement of the foreign currency public debt somehow seriously hinder the economic interests of Russia,” Alfa Bank’s economist Natalya Orlova.
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