How could Russia deal with sanctions against its sovereign debt?

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MOSCOW – Analysts at the US bank City have revealed what would happen to the Russian economy if there is a possible adoption of sanctions against Russia’s sovereign debt. Specialist Aleksandr Abramov commented on this.

Washington said it was considering the possibility of sanctions against Russia’s sovereign debt. According to financial analysts at the US bank City, these sanctions would lead to capital outflow from Russia and devaluation of the national currency corresponding to 15%.

Russian economist Aleksandr Abramov commented on the prediction by the US analysts.

According to him, the introduction of sanctions against sovereign debt is unlikely. However, taking into account that 33% of Russian public debt securities belong to non-residents, these sanctions would cause financial problems for Moscow.

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“We would lose a third of the funding sources and the government would need to implement an expansionary monetary policy. I believe that if the other variables do not change, this could lead to the devaluation of the ruble,” he said.

At the same time, Abramov declares that if sanctions against Russian sovereign debt are adopted, Russia will be able to deal with negative consequences. He went on to explain;

“If this happens, the Central Bank and the Ministry of Finance have measures to counter these trends. They will try to use some additional mechanisms to stabilize more or less the ruble, because the ruble stability, I believe, is an important index for the government and for the country’s monetary authorities,”

Earlier, the US Congress proposed to prevent US citizens and US residents from conducting operations with government bonds from Russia, however, this is yet to be put in place.

Meanwhile, the media reported that US President Donald Trump has suspended the adoption of sanctions against Russian sovereign debt because, for the Treasury Department, this measure may affect not only Russian investors and companies, but also Americans.

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