US Sanction on Russia Causes rouble to Sink

US Sanction on Russia Causes rouble to Sink

US Sanction on Russia Causes rouble to Sink

Friday, Russia warned the US that it would regard any move to curb the activities of its banks as a declaration of economic war which it would retaliate against, stepping up a war of words with Washington over newly imposed sanctions.

The warning, from Prime Minister Dmitry Medvedev, reflects Russian fears over the impact of new restrictions on its economy and assets, including the rouble which has lost nearly 6% of its value this week on sanctions jitters.

Economists expect the economy to grow by 1.8% this year. But if new sanctions proposed by Congress and the State Department are implemented in full, something that remains uncertain, some economists fear growth would be almost cut to Zero in future.

In a sign of how seriously Russia is taking the threat, President Vladimir Putin discussed what the Kremlin called “possible new unfriendly steps by Washington” with his Security Council Friday.

Moscow’s strategy of trying to improve battered US-Russia ties by attempting to build bridges with US President Donald Trump is backfiring after US lawmakers launched a new sanctions drive last week because they fear President Trump is too soft on Russia.

That in turn has put pressure on President Trump to show he is tough on Russia ahead of mid-term elections.

Wednesday, the State Department announced a new round of sanctions that pushed the rouble to 2-year lows and sparked a wider sell-off over fears Russia was locked in a coming of never-ending sanctions.

Separate legislation introduced last week in draft form by Republican and Democratic senators, dubbed “the sanctions bill from hell” by one of its backers, proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of USDs.

PM Medvedev said Moscow would take economic, political or other retaliatory measures against the United States if Washington targeted Russian banks.

In practice there is little Russia could do to hit back at the United States without damaging its own economy or depriving its consumers of sought after goods, and officials in Moscow have made clear they do not want to get drawn into what they describe as a mutually-damaging tit-for-tat sanctions war.

The threat of more US sanctions kept the rouble under pressure Friday, sending it crashing past 2-year lows at 1 point before it recouped some of its losses.

The Russian central bank said the rouble’s fall to multi-month lows on news of new US sanctions was a “natural reaction” and that it had the necessary tools to prevent any threat to financial stability.

One tool it said it might use was limiting market volatility by adjusting how much foreign currency it buys. Central bank data showed Friday it had started buying less foreign currency Wednesday, the 1st day of the rouble’s slide.

The full US Congress will not be back in Washington until September, and even then, congressional aides said they did not expect the measure would pass in its entirety.

While it is difficult to assess so far in advance, they said it was more likely that only some of its provisions would be included as amendments in another piece of legislation, such as a spending bill Congress must pass before 30 September to prevent a government shutdown.

America First

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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