US House Adds Sanctions Against Russian Debt to Defense Policy Bill | New

WASHINGTON – The US House has backed a provision that would extend the ban on Americans buying or selling newly issued Russian sovereign debt in secondary markets to punish Moscow for its interference in the US elections.

The measure, drafted by Representative Brad Sherman, a Californian Democrat, and passed by voice vote, will be included in the annual defense policy bill that is expected to pass the House with broad bipartisan support later this week. His prospects in the Senate are unclear.

Targeting sovereign debt swaps in the secondary market would mark a major escalation of the sanctions regime. Russian markets have benefited this year from the perception that President Joe Biden does not want to confront the Kremlin as he deals with more pressing issues from China to Afghanistan.

The provision is one of many sanctions amendments in the House that threaten to rekindle investor concerns over possible further restrictions on Russia.

While the proposed legislation is “not as bad” as an outright ban on pre-existing bonds, “it is certainly a problem,” said Sacha Tihanyi, head of emerging markets strategy at the Toronto Dominion Bank. “This could ultimately increase financing costs for Russia, especially during times of market turmoil.” The immediate impact on the market could be marginal, but the move could send a signal for future participation, he said.

The ban would target bonds in any currency issued by the Russian Central Bank, the Russian National Wealth Fund and the Russian Federal Treasury with a maturity of more than 14 days, according to Sherman’s arrangement.

Current US sanctions prohibit the purchase of new issues of Russian sovereign debt but do not affect secondary trade. Foreign ownership of Russian bonds has exceeded 20% for the first time since April of this month.

The legislation also requires the director of national intelligence to prepare a report on foreign interference in future presidential and midterm elections. The next midterm elections take place in 2022, while 2024 is the year of the presidential elections. After receiving the intelligence report, the president must determine whether to suspend or keep the sanctions in place. The US Chamber of Commerce opposes this provision, arguing that it would limit the ability of US banks to serve their corporate clients operating in Russia.

“Although intended to impose constraints on the Russian government, the legislation would have an insignificant effect on its ability to raise funds on world markets – given the Russian government’s strong foreign exchange and gold reserves – while still seriously damaging the operations of American companies in Russia, ”Neil Bradley, Executive Vice President of the House, wrote to House lawmakers on September 21.

The United States House also this week approved an amendment to the Defense Bill that would authorize new mandatory sanctions against entities and individuals responsible for the planning, construction and operation of the Nord Stream 2 pipeline. between Russia and Germany.

The amendment drafted by Rep. Michael McCaul of Texas, the top Republican on the House Foreign Affairs Committee, and Democratic Rep. Marcy Kaptur of Ohio, chair of the Energy Development and Development Subcommittee House appropriations water, stands out because it would repeal the national law waiving interest for the penalties required by the law in force relating to the gas pipeline project.

The Biden administration earlier this year lifted sanctions to allow completion of the pipeline in exchange for German assurances that Berlin would help protect Ukraine from a Russian power cut. Nord Stream 2 is currently awaiting regulatory approval, a process which Germany’s energy regulator said could take four months on September 13.

Another potentially passable amendment, drafted by New Jersey Democrat Tom Malinowski, would require the president to submit a list of 35 officials and businessmen seeking sanctions to the relevant congressional committees.

Prospects for the provisions are unclear in the US Senate. The House and Senate are to negotiate a final defense policy bill that will be sent to the president for signature. The Senate has not yet considered its version of the bill.


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