Page 52 - bne_Magazine_September_2018

52 I Eastern Europe bne September 2018
US has declared economic war on Russia says Russian PM Dmitri Medvedev
MOSCOW BLOG:
US declares economic war on Russia
Ben Aris in Berlin
“The US has declared economic war on Russia,” Russian Prime
Minister Dmitry Medvedev said on August 10 in remarks that set the
stage for a real military clash between the two countries.
Tensions between Moscow and Washing- ton have been escalating steadily since the start of this decade, but these rising tensions have only become visible in the last seven years. Now they are coming to a head.
The US announced yet another round of sanctions on Russia earlier in the week that explicitly target Russian domestic treasury bills, OFZs. If these sanctions are passed into law then they will be the most significant yet. The new sanctions will really hurt the government’s ability to finance its budget deficit and could seriously impede the economic recovery. The Ministry of Finance has an ambi- tious RUB2.5 trillion ($37.4bn) borrow-
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ing programme for next year, and given the tense geopolitics it was intending to raise most of this money on the domes- tic market. That will be a lot harder if the new sanctions are put in place. By targeting the bonds these sanctions are specifically designed to do real and last- ing damage to the Russian economy.
"Western partners argue that the Rus- sians are bad, they carry out the wrong policy, that the government of the
If the sanctions are imposed then growth will slow by between 0.5% and 1.5% and the standard of living will decline further. Medvedev said the Kremlin would not accept these sanctions without some sort of response, although he gave no specifics as to what that response would be.
Since Russia’s capital market was hooked up to the international financial system by joining Clearstream and Euroclear in 2012 the bond market has flourished.
“The new sanctions will really hurt the government’s ability to finance its budget deficit and could seriously impede the economic recovery”
Russian Federation should change its position on a number of issues, but to a large extent this [is a] restriction of our economic power," Medvedev said.
Able to buy Russian domestic bonds from the comfort of their trading desks in London and New York, international investors have piled into the OFZs, hold-