US prolongs Russia sanctions by one year

US prolongs Russia sanctions by one year
Obama has approved another year of US sanctions against Russia.
By bne IntelliNews March 3, 2016

US sanctions against Russia will be prolonged by one year because Moscow's actions in Ukraine pose an "unusual and extraordinary threat to the national security and foreign policy of the United States", according to a March 2 notice by President Barack Obama published by the White House.

The extension comes amid Russian attempts to place international sovereign securities, which is de-facto not prohibited under the existing sanctions regime, but could potentially trickle down funding to sanctioned state-controlled companies. The US Department of State and the Treasury reportedly warned major US investment banks against subscribing for the issue of $3bn paper.

"The actions and policies of the Government of the Russian Federation, including its purported annexation of Crimea and its use of force in Ukraine, continue to undermine democratic processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to the misappropriation of its assets," the US president's notice says.

The sanctions will this continue for one more year after March 6, 2016, as the actions and policies addressed by the sanctions continue to "pose an unusual and extraordinary threat to the national security and foreign policy of the United States".

The US extension will also pressure the European Union to extend its own sanctions against Russia, having in January prolonged them by another six months to July 31, 2016. Previously all major moves in the sanctions regime by the EU were precipitated by the US decision.

Following the imposition of the Western sanctions in summer 2014, Russia responded with its own ban on EU food products and by launching a self-sufficiency drive to cut down its need for imports.

Russia does not intend to ask for the sanctions to be lifted, Prime Minister Dmitry Medvedev said in mid-February, adding that Russia will instead wait until the West understands that it is only harming itself by continuing the measures.

Quoting the devil figure from the Mikhail Bulgakov novel "The Master and Margarita", Medvedev said there is no need to ask for anything as, "they'll make the offer, and then they will give everything. So we'll do the same - we will never ask them to cancel these sanctions."

The US and EU measures include travel bans and bank account and asset freezes for a list of individuals believed to be closely associated with President Vladimir Putin and involved with the annexation of Crimea; debt and equity financing limitations for a number of state-owned companies and banks; and limitations on the transfer of advanced hydrocarbon extraction technology and expertise.  

While affirming Russia's BB+ foreign currency rating on February 17, Standard & Poor's maintained its negative outlook, reflecting a risk of geopolitical events resulting in significant tightening of the sanctions, along with the concern that fiscal buffers could deteriorate faster than currently expected.

In December, Moody's Investors Service said that although the situation in Ukraine has improved, it does not expect the existing sanctions to be eased or lifted until the parties involved in the conflict "demonstrate their willingness to abide by the terms of Minsk II [peace treaty] for a sustained period of time".

At the same time, the status of the annexed Crimea peninsula is seen as a "potentially insoluble impediment to any final resolution of the impasse between Ukraine and Russia", Moody's added.