Andrei Movchan: What matters is the quality of sanctions, not quantity

The new expected package of anti-Russia sanctions may include a ban for US investors to buy Russia’s OFZ government bonds on the primary market. Can Russia be sanctioned the same way as Venezuela? Does the package proposed by US senators correspond to its American nickname, ‘sanctions from hell’? Invest Foresight asked Andrei Movchan, a well-known financier, managing partner of Movchan’s Group investment company, to comment on these and other issues.

Credit: Evgeniy Biyatov | RIAN

– Some experts believe a ban on transactions with Russia’s sovereign debt may cause a devaluation of the ruble. Is it true?

– I think there is nothing special to discuss. The proposed sanctions are feeble. Moreover, the bill does not actually contain any decisions, only gives the executive authorities the opportunity to make some decisions. And again there’s the same old song about sovereign debt, which we do not really need because we have reserves that are greater than our sovereign debt. Then some banks are mentioned that are violating the Minsk Agreement … This is also quite funny: how can they prove who does it and how? So, the bill looks like a paper that had to be written, because it was impossible to avoid, but there was nothing to write about…

– Can they do the same with Russia as with Venezuela?

– No one can do this to us, because it is Europe that is trading with Russia, not the United States. America only buys two types of our products – titanium and rocket engines. It will continue to buy both. So what is there to talk about? I cannot imagine a situation in which this bill could lead to an actual ban, say, on the purchase of Russian debt securities. But even if this happens, we are not too eager to sell them. And if we have to, sovereign debt can be placed in euros, or yuan, whatever … The Americans themselves (I have rather intensive contacts there including the presidential administration) admit: this is a feeble threat. They agree that sanctions have exhausted their potential in a certain sense.

– But they say they are tightening the sanctions. Are you saying it is the other way around?

– Maybe, as a result of this whole stir, they will indeed announce tighter sanctions. But even so, they are unlikely to lead to any changes for the Russian economy or politics. The main reason both Washington and the Kremlin need these sanctions is to make everyone think that they exist. Washington will report this fact to voters; the Kremlin will use it to explain the problems in the economy. That’s all.

– So it turns out that Accounts Chamber Chairman Alexei Kudrin is mistaken. He has recently said that Russia is not immune to sanctions. Or is it only about technologies?

– I do not know what specifically Mr. Kudrin was speaking about, but our technological sector is not immune, of course. But it seems that technologies is not what we particularly need. Our economy is stagnating, and everyone seems to be okay with it.

– The expected measures include sanctions against crude oil production in Russia. How can this be implemented?

– This is partly about transfer of technologies. We are running out of easy methods of extracting crude oil in Russia, and there is oil that is difficult to extract. We do not have such technologies of oil extraction. US senators suggest that the transfer of these technologies to us can be prohibited. By the way, such transfers are already partially banned, but this ban can be expanded. And partly this is only a declaration: members of the US Congress and senators often fail to understand the context and resort to such declarative statements.

– A recently published report lists various sanctions introduced against Russia by different countries in the past few years. The European Union has introduced 25 restrictions, while the United States has introduced only 9. Does this mean Europe has taken a tougher stance on Russia?

– What matters is the quality of sanctions, not their quantity. Also, you should not forget that Americans have always had some restriction on certain goods and services from Russia. So it is not exactly correct to count them. I think it is more logical instead to see the actual impact of sanctions – and this impact is meager. In my opinion, the biggest impact European and US sanctions actually have is their influence on Russia’s domestic policy. First, as I already mentioned, sanctions give the Kremlin an opportunity to explain economic problems, and second, they allow uniting Russians against ‘external enemies’, because sanctions are a clear signal of animosity.

By Elena Skvortsova 

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