Russia Prepared to Handle Debt Sanctions But Borrowing Costs May Increase, US Investor Says

WASHINGTON (Sputnik) – The Russian government is prepared to deal with new US sanctions against its debt, however, the costs of borrowing will grow as a result, Director of Navigator Principal Investors Kyle Shostak told Sputnik.

Earlier in the day, the United States introduced new sanctions against Russia, which, in particular, prohibit US financial institutions from buying Russian government bonds (OFZs) during primary placements after 14 June. However, they will still be able to buy and sell Russian government bonds on the secondary market.

Shostak called the most recent move by Washington “unprecedented in modern financial history”, and warned that it will lead to several issues.

Shostak shared that he does not expect all investors to leave the market over the measure as some will continue to buy secondaries from primary dealers.

He believes it is highly likely that non-US foreign investors will replace the Americans.

Shostak went on to say that another implication of the new sanctions is that the measure will deter more compliance-cautious foreign buyers, who will opt not to “play with fire” under any circumstances.

Asked about how the sanctions will affect the ruble, Shostak said, “The ruble will see more short-term volatility and may stay volatile until the exact impact of the new measure is fully known and priced in”.

The Bank of Russia said on Thursday it was monitoring the situation in the financial market after the United States imposed sanctions against Russian government debt, and will use all available tools to maintain financial stability, if necessary. The regulator noted that the share of foreign investors in the total volume of public debt and even more so in primary placements had significantly decreased over the past year.

The Russian Foreign Ministry said the US government’s actions are contrary to its declared intention to build pragmatic relations with Russia. The Foreign Ministry has notified US Ambassador to Russia John Sullivan that retaliatory measures by Moscow will be announced soon.

Sourse: sputniknews.com