Will Russia's govt funds investment in U.S Treasuries be banned?
The Just Russia party has submitted a bill prohibiting placement of the Russian National Wealth Fund money in U.S. securities to the State Duma, parliament’s lower chamber, leader of the party Sergei Mironov said.
"The Just Russia faction has submitted to the State Duma a draft law changing the Budget Code of the Russian Federation. The main issue of the bill is prohibition of placement of the National Wealth Fund money in bonds and other securities of the U.S, Interfax cited Mironov as saying.
"If we launch counter-sanctions, we must start with this," the party leader added.
The bill "On counter measures against unfriendly actions by the United States and/or other foreign countries" was submitted to the Russian State Duma by Speaker Vyacheslav Volodin and leaders of all parliamentary factions on April 13. The bill was drafted in response to the challenges coming from the US and its officials in the form of "unfriendly and non-constructive activities to impose sanctions against both Russia as a whole and its citizens and legal entities."
The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to a correspondent of Vestnik Kavkaza, noted that the choice for U.S. securities was due their reliability and profitability. "There are no other equally reliable and profitable instruments to the extent to which the state needs to allocate reserves. Reliable securities of European countries either do not provide profitability, or generally have a negative yield, since interest rates in Europe are lower than in the U.S. It turns out that, despite the difficult political relations of our countries, there is no better option for investing reserve funds in the currency," he explained.
In this regard, the ban on investing in U.S. securities is not justified in economic terms. "Now the interest income on these securities is slightly higher than 2% and has a certain tendency to increase, but after the ban it will give zero income. These investments have their risks - remember the Iranian state funds frozen after the 1979 revolution. However, we should not seriously consider such risks in the near future," Sergei Hestanov predicts.
The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, noted that the Russian Central Bank's foreign exchange reserves are intended to provide the necessary international settlements, and do not belong to the budget. "In external markets, 70%-80% of such calculations are made in dollars, which means that the Central Bank has only two choices: either it keeps dollars in reserves to provide its companies and banks with currency, or it will have to buy dollars each time, which will cause additional costs," he said.
"By refraining from investing in assets denominated in dollars, we significantly reduce the liquidity of our assets. In this case the risks will be caused by a ban on investments in U.S. securities and will be associated with a significant decrease in liquidity of those assets that are part of the NWF. Finally, considering today's global payment turnover, the availability of funds in dollars is simply mandatory," Korishchenko concluded.