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The ruble won back part of the losses after the announcement of sanctions against the state debt of the Russian Federation

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The United States on Thursday imposed a wide range of sanctions against Russia to punish it for electoral interference, cyber-hacking attacks, intimidation of Ukraine, and other “malicious” acts.

These measures include blacklisting Russian companies, expelling Russian diplomats and imposing restrictions on the Russian sovereign debt market – steps that have surely angered Moscow, writes Reuters.

President Joe Biden, to punish Moscow for meddling in the 2020 US elections, has banned US financial institutions from participating in the initial public offering of Russian ruble-denominated sovereign bonds from June 14. Since 2019, U.S. banks have been banned from participating in the primary market for dollar-denominated sovereign bonds. That is, the Americans will be able to buy OFZs in the secondary market.

The US Treasury Department has also blacklisted 32 organizations and individuals that it said have carried out attempts by the Russian government to influence the 2020 US presidential election and other “acts of disinformation and interference.”

Together with the European Union, Great Britain, Australia and Canada, the Treasury also imposed sanctions on eight individuals associated with Russia’s ongoing “occupation and repression in Crimea, which Russia annexed from Ukraine in 2014,” the document says.

The Kremlin said it would respond in kind and warned that new US measures would reduce the chances of a summit between US Biden and President Vladimir Putin.

Ruble rose

The Russian ruble, which fell noticeably at the beginning of Thursday’s trading after American media reports that sanctions against the national debt will be announced today, strengthened after their official announcement by the US Treasury and by mid-day won back most of the morning losses. The formula “buy on hearsay, sell on facts” worked.

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The ruble made up for some of its daily losses against the dollar shortly after the sanctions news, trading at 76.3025 per dollar at 16:00 local time, up from 77.0718 just before the sanctions were announced.

“Infernal” sanctions

That is how they were dubbed by American lawmakers, but it seems that nothing terrible happened.

Earlier, there was one sanctions restriction in relation to the Russian government debt: since August 2019, American investors cannot participate in the initial offerings of sovereign Eurobonds. In practice, this means a de facto ban on the Ministry of Finance placing new dollar-denominated Eurobonds, so in 2020 Russia borrowed abroad only in euros.

But the bulk of government borrowing falls on the domestic market. The main role in primary placements of OFZs is now played by Russian state-owned banks, the share of non-residents in federal loan bonds is about 20%. In the March auctions, the total volume of placement at which amounted to 562.6 billion rubles, the share of non-residents was 9.6%.

Nothing wrong

The sanctions were imposed after President Joe Biden’s telephone conversation this week with Russian leader Vladimir Putin, and as Russian forces gather at the border with Ukraine, CNBC recalls.

Washington has officially blamed the Russian Foreign Intelligence Service (SVR) for the SolarWinds cyberattack, unveiled late last year and described by cybersecurity experts as one of the largest and most complex hacking operations in history.

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“Today’s US sanctions continue the general trend of deteriorating relations seen since the annexation of Crimea,” Maximilian Hess, head of political risk at Hawthorn Advisors, a London-based law firm, told CNBC.

“A key part” of these sanctions, he said, “is the removal of American companies from the primary market for ruble-denominated debt of the Russian government.”


However, as noted by Hess, this “will not have a serious impact, especially given Russia’s managed debt burden.”

Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, is far from tough.


“It’s like guys, come on, you need to do something stronger than that,” Ash wrote in a note following the announcement.

“The ban from participating in primary auctions means that the law still allows US companies to hold this debt. Thus, US institutions cannot buy Russian sovereign bonds on the initial issue, but they can persuade their friends from Russian banks to buy it for them during the initial issue, give them a commission, and then buy it in the secondary market. ”


The Biden administration’s decision to ban US financial institutions from participating in the primary market for sovereign debt is the least painful option for Russia, a senior government official said, asking not to be named. According to the Russian official, Americans will be able to buy debt in the secondary market. The Bank of Russia may not have to raise its key interest rate faster than planned to compensate for any market volatility, Bloomberg writes.

The build-up of Russian troops on the border with Ukraine

Biden’s call to Putin on Tuesday, at least the second between the two leaders since Biden took office in January, came as the United States and other Western nations grew tired of Russia’s growing military buildup along its border with Ukraine, where it has concentrated tens of thousands of servicemen and military equipment.

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“We are now seeing the largest concentration of Russian forces on Ukraine’s borders since 2014,” Secretary of State Anthony Blinken said Tuesday after visiting NATO headquarters in Brussels. “This deeply worries not only Ukraine, but also the United States.”


Regional experts believe the move may be an attempt to test Biden’s character and intimidate Ukraine; a more pessimistic outlook suggests that its goal is to nudge Ukraine towards renewed conflict.

Biden, in a telephone conversation with Putin, “underlined the United States’ unwavering commitment to Ukraine’s sovereignty and territorial integrity,” according to the White House.

Biden suggested that the summit should be held somewhere outside the US and Russia to “discuss the full range of problems facing countries.”

On Tuesday evening, the Kremlin said in a statement that Biden had “offered to consider holding a personal summit for the foreseeable future.”

Moscow’s response

Moscow will decisively rebuff Washington’s actions, Russia’s response to US sanctions will be inevitable, said Russian Foreign Ministry spokeswoman Maria Zakharova.


“Such aggressive behavior will certainly be firmly rebuffed, and the response to sanctions will be inevitable,” she said at a briefing on Thursday.

“Washington must realize that the degradation of bilateral relations will have to pay. The responsibility for what is happening lies entirely with the United States,” Zakharova stressed.


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