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18 Jul, 2014 14:52

Russia ‘solid’ enough to fend off US sanctions – finance expert to RT

Russia ‘solid’ enough to fend off US sanctions – finance expert to RT

Russian firms and banks that fell under new US sanctions have enough funds to ride out the restrictions, Aleksandr Prosviryakov, a partner at Lakeshore International, an asset management firm, told RT in Moscow.

Compared to Russian bank’s annual net income of $24 billion (850 billion rubles) and the $480 billion the country has now in gold and foreign currency reserves, the situation where Russia has $640 billion in foreign debt due by 2043, is “solid,” Prosviryakov says.

The Russian Central Bank is home to the world’s fifth largest currency reserves. Separately, the Wealth and Reserve Fund, a ‘rainy day’ type fund, has about $144 billion.

However, a third round of sanctions where Moscow is completely cut off from borrowing and investment could spell trouble, Prosviryakov added.

"If a third phase of sanctions come, of course it's going to hurt the economy, because we will have to find ways to finance the debt that we have - more than $600 billion of long-term debt, and our reserves are approximately $500 billion, so we are pretty solid in terms of our fiscal policy, in terms of the assets we hold as a country. But still, it will hurt the markets."

The last round of sanctions has blocked a dozen Russian companies from the US debt market, limiting loans to under 90 days. The companies that have been handed down sanctions are able to handle their debt, but if sanctions are expanded to all Russian companies, companies would be hit hard with higher finance rates, which would be a major cost for Russian businesses.

Alexander Prosviryakov, partner at Lakeshore International (RIA Novosti)

"Luckily for us, the companies that are on this list don't need any funding,” Prosviryakov said, adding that a complete block from capital markets would hurt Russia to a point it would have to respond with countersanctions.

"There are talks that if the US goes with a third round of sanctions, we will have to respond by blocking any US companies," he said.

The US has about $10 billion invested in Russia, mostly in mining, oil technology, and banking, according to the US Chamber of Commerce.

"If Russia wants to issue sanctions against the US, they will just stop the business of these entities in Russia, just revoke the license-it’s easy to do-it can be done overnight."

According to Prosviryakov, Iran-style sanctions are still far away, because Russia hasn’t done anything to provoke such measures.

For example, former Secretary of State Hilary Clinton called for Gazprom to be sanctioned, if it comes out Russia was involved in the Malaysia Airlines plane crash on Thursday.

However, as Prosviryakov said, the connection between the civil war in Ukraine and gas deliveries is far too weak, and the US simply wants Europe to stop buying Russian gas and start buying US gas.

"Economic sanctions in her [Hilary Clinton, Ed.] view will hurt Russia, and hurting Russia means that the war will stop," he said.

Sanctions have taken a toll on the Russian stock market and currency on Thursday, but Prosviryakov believes investors will be back.

"I think the market will stabilize. Dividends this year are much bigger than last year - in July alone, minority shareholders will receive $6 billion in dividends - and where will they place them? We think this money will go back to the markets."