The U.S. House of Representative has approved an amendment that would ban U.S. citizens from buying or selling newly issued Russian sovereign debt on both primary and secondary markets.
The amendment, added to a defense-spending bill by voice vote, is part of Congress’s effort to punish Moscow for alleged interference in U.S. elections.
The defense-spending bill, known as the National Defense Authorization Act (NDAA), is expected to pass the House with broad support late this week. It’s fate in the Senate is unclear.
Representative Brad Sherman (Democrat-California), one of the sponsors of the amendment, said an analysis by the Russian credit-rating firm ACRA suggested that sanctions on sovereign debt could increase the Russian government’s cost of borrowing by 0.5 percent to 0.8 percent.
“That’s a very significant economic cost to the Russian government,” Sherman said in a statement issued by his office on September 22.
“An immediate prohibition on U.S. persons trading in new Russian sovereign debt would send a powerful message, both to the markets and to [President Vladimir] Putin, that U.S. sanctions against Russia have not peaked, and that the United States is prepared to act against Putin’s efforts to undermine our democracy and divide our country,” Sherman said.
Russia has repeatedly denied all accusations of interference in U.S. elections.
The ban would cover secondary-market trading of bonds in any currency issued by Russia’s Central Bank, National Welfare Fund, or Federal Treasury with maturity of more than 14 days.
Current U.S. sanctions ban the purchase of new issues of Russian sovereign debt but do not affect secondary trading.
The measure would also assign the U.S. director of national intelligence to provide reports to the president on possible interference in presidential and congressional elections. The president will then have to decide whether to suspend or to extend these sanctions.
The U.S. Chamber of Commerce opposes the provision, arguing that it would limit the ability of U.S. banks to serve their corporate clients operating in Russia.
“While intended to impose constraints on the Russian government, the legislation would have insignificant effect on its ability to secure funds in global markets — given the Russian government’s strong foreign-exchange and gold reserves — while severely harming U.S. companies’ operations in Russia,” Neil Bradley, the chamber’s executive vice president, wrote to House lawmakers on September 21.
