Concerns in Russia over fate of dollar holdings
Concerns are rising among investors in Russia over the fate of their dollar holdings as the US is preparing to impose fresh sanctions that could ban the country’s banks from using the greenback.
Last week, Andrey Kostin, chief executive of VTB Group, spooked investors by suggesting that it may not be able to honor the claims of dollar depositors in extreme circumstances caused as a result of sanctions.
This drew a reaction from Russia’s central bank with its Governor Elvira Nabiullina emphasizing that dollar holdings were safe whatever new sanctions the US would throw at Russian banks.
Nabiullina also emphasized that no plan was on agenda for forced conversion of dollar holdings in case investors claimed their dollars.
“We don’t see any kind of threat to foreign-currency deposits and we haven’t considered any kind of forced conversion,” she was quoted by media as saying.
Nabiullina was further quoted as saying that Russia’s central bank understands the possible consequences of potential new US sanctions against Russia and it is ready to support Russian banks if needed in the future.
The Senate is considering various laws to punish the Kremlin for alleged election meddling, including one draft dubbed the “bill from hell.” This could bar Americans from buying new issues of Russian sovereign debt and ban Russia’s largest state banks from using dollars, according to a report by Bloomberg.
The draft bill is being championed by Republican Senator Lindsey Graham who has emphasized that he planned a “sanctions bill from hell” to punish Russia because “the current sanctions regime has failed to deter Russia from meddling in the upcoming 2018 midterm elections.”
Earlier in June, Russian President Vladimir Putin warned that new sanctions by the US Senate against Russia would complicate the relations between the two states.
Nevertheless, Putin emphasized that it was still too early to discuss about how Moscow would react to new US sanctions.