The United States, the European Union and the United Kingdom have imposed new sanctions against Russia due to the recognition of the independence of the Donetsk and Lugansk People's Republics. The restrictions turned out to be softer than expected, to which the exchange immediately reacted.

After the speech of US President Joe Biden, the stock market began to recover after a daily fall - trading on the Moscow Exchange ended at 3100 points (at the peak of the collapse it fell below 2760 points), and the dollar fell by 1.2%, to 78.8 rubles (during trading session exceeded the mark of 81 rubles).

What the West has decided

The US sanctions list includes restrictions on the purchase of secondary Russian government debt, two Russian banks (VEB and Promsvyazbank) and individuals (VK CEO Vladimir Kiriyenko, VTB Bank Deputy President Denis Bortnikov and Promsvyazbank CEO Pyotr Fradkov ).

The restrictive measures of the European Union and Great Britain are similar to those introduced by the United States - the sanctions also affected VEB and Promsvyazbank. In addition, the European Union has included in the Rossiya bank, and the UK - the Industrial Savings Bank, the Black Sea Development and Reconstruction Bank and the Genbank.

The British "black lists" also include three Russians - Gennady Timchenko, Boris and Igor Rotenberg. Their assets will be frozen, and the businessmen themselves will be restricted from entering the country.

The head of European diplomacy, Josep Borrell, in turn, announced restrictions on 27 individuals and legal entities. The European Union also intends to impose sanctions on 351 State Duma deputies who approved the recognition of the independence of the DNR and LNR.

In addition, German Chancellor Olaf Scholz announced his decision to suspend the certification of the operator of the Nord Stream 2 gas pipeline. It is still too early to talk about sanctions and, moreover, the freezing of the project, but this is not ruled out in Berlin. “First of all, we are far from it. What will happen now is a new safety assessment for gas supply in the light of everything that has happened,” the chancellor said, answering the question of what Russia should do to launch the gas pipeline.

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Restrictions on secondary debt

Commenting on reports of new sanctions, the Russian Ministry of Finance stated that they are monitoring the situation on the financial markets. Thus, in order to strengthen stability in the debt market, decisions on the need to hold auctions for the placement of federal loan bonds (OFZ) in the coming weeks will be made based on the situation on the market.

"A significant amount of temporarily free funds in the single treasury account (more than 4.5 trillion rubles with net borrowings planned for 2022 - 2.2 trillion rubles) allows for a flexible approach to the placement schedule," the department noted.

In addition, the Ministry of Finance recalled the decision of the Bank of Russia, which previously allowed financial institutions to temporarily not take into account changes in the market value of securities. According to the Ministry of Finance, this will help markets adapt to changes.

Decisions on OFZ placement will be made based on the market situation

The sanctions imposed by the United States apply to the secondary circulation of bonds issued by the Bank of Russia, the National Welfare Fund (NWF) or the Ministry of Finance after March 1, 2022. "Foreign investors have no obligation to sell they already hold in their portfolios. Thus, there should be no large-scale pressure on the secondary public debt market," BCS Express experts say.

The company recalled that earlier sanctions had already been introduced regarding investment in the primary market in new issues of Russian government securities. "In terms of the ability to attract external financing, nothing has changed. Moreover, it is worth considering the relatively low volume of the state external debt of the Russian Federation ($56.7 billion), which is a multiple of the record high gold and foreign exchange reserves ($639.6 billion). Threats to financial stability no," analysts said.

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Sanctions against banks

The US, EU and UK sanctions lists include two banks - VEB (plus 25 subsidiaries - VEB-Leasing, Prominvestbank, VEB Capital, Russian Export Center, VEB Ventures, CSKA football club and others ) and Promsvyazbank. The first is one of the largest creditors of the Russian economy, the US Treasury explained the inclusion of the second in the lists by the fact that it is Promsvyazbank that services almost 70% of defense contracts.

When assessing the possible consequences, it must be taken into account that VEB has been under sanctions since 2014 - however, earlier they were not blocking, but much softer, sectoral. In fact, VEB was effectively cut off from Western capital markets anyway, and, being unable to refinance its external debt, received subsidies from the federal budget to service it.

After Biden's speech, VEB said they would continue to "improve their financial stability and operational efficiency, properly fulfill their obligations, and also use all available means to protect their rights and legitimate interests.""VEB.RF always complies with the laws of the countries in which it implements its projects. The restrictions imposed by the United States will not affect VEB.RF's commitment to its mission to promote the development of the Russian economy and the well-being of its citizens," the company said in a statement.

In turn, Promsvyazbank noted that the imposition of sanctions was expected. Now the bank is operating normally, you can replenish and withdraw money from cards at any office or ATM. Servicing of deposits, loans and settlement transactions also continues.

"The imposition of sanctions imposes a number of restrictions on transactions in foreign currency, including transactions with securities, maintenance of accounts, as well as the use of bank cards in the countries that have announced sanctions," Promsvyazbank said.

What's next

In his speech, Joe Biden said that so far the first package of sanctions has been approved, and in the event of an escalation of the crisis around Ukraine, the following ones will be introduced. Officials in Brussels and London also signaled a willingness to tighten restrictions. At the same time, all three sides are ready for dialogue with Moscow. In particular, the American president expressed the hope that "diplomacy is still available."

Leading researcher at the RANEPA, Doctor of Economics Alexander Pakhomov notes that the sanctions currently imposed are targeted. Further development of the situation, according to the expert, will depend on the geopolitical situation - in the event of an increase in confrontation, Washington may impose restrictions on lending, as well as limit the supply of high-tech equipment to Russia.

At the same time, according to Pakhomov, the US's ability to put pressure on Russia is limited. "Given the fairly stable state of the Russian economy, the United States is unlikely to be able to exert serious pressure," the expert noted.

The scientific director of the Institute of Regional Problems, Dmitry Zhuravlev, predicts that the sanctions imposed are only "reconnaissance in force."

“The list of banks does not include either Sberbank or VTB, that is, those that are directly connected with citizens. After all, sanctions are needed in order to arouse dissatisfaction with the authorities within the country. It is clear that there will still be restrictive measures, otherwise the efficiency from them will be unacceptably low for America. Including they will certainly affect the energy sector," the expert noted.

According to him, the only way out for Russia is to diversify from west to east. "Banks need a couple of months to master the markets of Asia, it will take about a year to supply energy carriers - it will be necessary to build the infrastructure," Zhuravlev explained.

The imposed sanctions have not yet affected the work of banks

Georgy Ostapkovich, director of the Center for Business Research at the National Research University Higher School of Economics, believes that sanctions against the largest Russian banks and technology imports will be the most significant.

"The rest, most likely, we can handle. The oil and gas sector is unlikely to be touched - without our hydrocarbons, the price for them will jump sharply, this is not beneficial to anyone. And Nord Stream 2, while frozen, will most likely be launched sooner or later. In any case, while the losses from the situation with this pipeline are small," the economist explained.

According to Ostapkovich, any restrictions will not last forever: "In any case, negotiations will begin on their abolition, change. The stock of gold and currency will allow us to survive until this moment without big losses."

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