On 29 January, the US Treasury published a list of Russian politicians and businessmen as required by section 241 of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA). As explained in the US OFAC Frequently Asked Questions, “this report is not a ‘sanctions list’.  While some persons mentioned in the report may have been sanctioned pursuant to other authorities, the inclusion of individuals or entities in this report, its appendices, or its classified annex does not and in no way should be interpreted to impose sanctions on those individuals or entities. Inclusion in this report also does not constitute a determination by any agency that any of those individuals or entities meet the criteria for designation under any sanctions program. Moreover, the inclusion of individuals or entities in this report, its appendices, or its classified annex does not, in and of itself, imply, give rise to, or create any restrictions, prohibitions, or limitations on dealings with such persons by either U.S. or foreign persons. Neither does inclusion in the unclassified report indicate that the U.S. Government has information about the individual’s involvement in malign activities.”

That being said, on 26 January, the US OFAC updated its Specially Designated Nationals And Blocked Persons (SDN) and Sectoral Sanctions Identifications (SSI) lists by adding new persons (individuals and entities) which implies that new persons are targeted by asset freezes and visa bans (SDN list) or/and sectorial sanctions (SSI list).

Impact on country risk

The publication of the list was largely expected given it was required by the CAATSA. The fact that the persons on the list are not targeted by new sanctions is a (temporary) relief for Russia, although, the Russian authorities declared to regret this ‘unfriendly’ list. A classified annex to the report could serve as a road map for new measures. Moreover, in a communication, the US State Department made it clear that new sanctions could still be imposed with respect to persons engaging in ‘significant’ transactions with the intelligence or defence sector of the government of Russia (pursuant to section 231 of CAATSA).

The exchange rate of the rouble (v-à-v the USD) reacted quietly to the announcement (cf. graph). Moreover, broadly, the Russian economy is expected to grow by 1.7% (according to the latest IMF World Economic Outlook of January 2018). After having peaked in 2014-15, the inflation rate has declined to a low level (2.5% in December 2017) and is expected to reach around 4% in 2018. In this context, the central bank cut its benchmark interest rate in 2017 which led to decline in the lending rate, positive news for companies. The current account surplus of the energy exporter is likely to widen amid rising oil prices (compared to 2017). Foreign exchange reserves continue to slightly increase and are high, covering nearly 11 months of imports. External debt ratios are moderate and on a downward trend. In this context, Credendo’s country risk classifications remain unchanged.

Analyst: Pascaline della Faille – p.dellafaille@credendo.com