Biden's Sanctions on Russia: What Do They Mean?

Russian President Vladimir Putin

Joe Biden has imposed new sanctions against Russia including measures targeting its government debt.

The sanctions ban US financial institutions from trading in newly issued Russian state debt, known as OFZs, and bonds issued by the Russian central bank and National Wealth Fund. The ban affects debt issued after June 14.

But it does not stop American institutions from dealing in previously issued Russian bonds. And, significantly, it does not, for now, apply to foreign banks or investment firms.

It can certainly, therefore, be labeled a measured action, if one has the dubious view that any action was needed.

Russia’s government sells most of its sovereign debt domestically, and it finances its operations overwhelmingly through the sales of energy. American investors hold only seven percent of Russian government debt denominated in rubles, according to Oxford Economics in London.

Russia’s total debt issued in rubles rose to 14 trillion ($180 billion) by the end of the year, about 80 percent of it held by local investors.

The ruble dropped as much as 2.2 percent in early trading on Thursday to about 77.5 to the US dollar after the sanctions were announced. 

Russia’s foreign ministry summoned the US ambassador John J. Sullivan to its headquarters for what it said would be a “difficult” discussion.

Kremlin Spokesman Dmitry Peskov said that Moscow would act in accordance with the principle of reciprocity in its relations with Washington. He noted that new US sanctions would not facilitate the organization of a meeting that Biden proposed to Putin for this summer.

The sanctions also include the expulsion of 10 Russian diplomats from the US and sanctions against 38 entities, individuals and companies for allegedly taking part in efforts to interfere in US elections and conduct cyber attacks.

The European Union has currently ruled out introducing restrictions against Russia’s national sovereign debt to follow in step with the US, according to sources.

 -RW