U.S. prohibited from providing any credit to Russia

U.S. prohibited from providing any credit to Russia

The second round of U.S. sanctions against Russia related to the Skripal case took effect today.

According to a notice by the State Department, the latest round of sanctions prohibits U.S. banks from making any loan or providing any credit to the government of Russia unless for the purpose of purchasing food or other agricultural goods. Washington also pledges to oppose the granting or extending of loans to Moscow from international financial organizations such as the World Bank and the International Monetary Fund.

The document also said that the new sanctions would ban exports of dual-use products to Russia, which, according to Washington, could be used by Moscow to develop chemical and biological weapons.

On August 2, U.S. President Donald Trump signed off on the second round of sanctions against Russia over what described as the poisoning of Skripal in the United Kingdom in 2018 under the Chemical and Biological Weapons Control and Warfare Elimination Act (CBW).

The first round of U.S. sanctions, introduced under the 1991 CBW Act, went into effect on August 27, 2018.

Under the first package, the United States halted providing assistance to Russia in accordance with the Foreign Assistance Act of 1961, except for "urgent humanitarian aid, food or other agricultural products."

Moreover, the U.S. State Department terminated arms sales to Russia under the Arms Export Control Act, excluding exports needed for cooperation in space, commercial space launches and items needed for ensuring the safety of civil aircraft flights. Washington also denied any credits, credit guarantees and financial assistance to Russia.  

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, former deputy chairman of the Central Bank of Russia Konstantin Korischenko, speaking to Vestnik Kavkaza, noted that the new package of sanctions will have little effect. "There have been no direct funding from the IMF and various countries for about 15 years," he recalled.

"A conditional Citibank cannot buy the securities directly from the Russian government, but if Sberbank buys them first, then one can buy them from Sberbank," Konstantin Korishchenko explained.

The former deputy chairman of the Russian Central bank, head of the finance, monetary circulation and credit department at RANEPA, Alexander Khandruev, in turn, drew attention to the fact that sanctions primarily hit Russia’s operations with U.S. residents. “If Russia has a sufficiently high sovereign investment rating and the profitability of its securities is beneficial for investors, then, being in a neutral position, they will continue to invest in the Russian sovereign debt. The only question is what is the share of American companies in our sovereign debt. Now the task of the Russian financial authorities is finding ways to adapt to these restrictive measures. Of course, sanctions are harmful, because new sources of financing may not be enough to accelerate economic growth, and attracting foreign investment plays a very significant role in this," he pointed out.

"When the sanctions were just introduced, Visa and MasterCard imposed restrictions on the cards, but didn’t go further. It led to the issuance of the Mir card. Now entrepreneurs will look at the development of the judicial practice, whether third countries involved in the acquisition of Russian securities be subjected to retaliatory measures from the U.S. authorities, how much these risks will be justified by the profitability of Russia's debt securities. So far, it is impossible to accurately predict their behavior," Alexander Handruev warned.

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