US polls a reprieve for Russia
• More uncertainty for investors as sanctions bills are put on hold
The US Congress is unlikely to pass any new sanctions on Russia, such as proposals that would affect its sovereign debt and energy projects, until after the November elections.
The House is likely to go into recess by the end of the week and not return until after November 6 ballotting, according to a Republican aide and a legislator. No bills on sanctions are scheduled for votes before then.
The delay means more uncertainty for investors trying to assess the market impact of a multitude of measures under proposal in the US as punishment for alleged election meddling. Foreigners unwilling to wait and see which sanctions will eventually make it into law have pulled more than $7.5bn out of Russia’s sovereign debt market since April.
The measures, which have gained bipartisan support, are likely to come up after legislators return. The Senate could take up sanctions before that but nothing would get sent to President Donald Trump for approval until after House passage.
“There’s a realistic chance the Senate can pass this bill before the elections,” said senator Chris Van Hollen, a Maryland Democrat and co-sponsor of a bipartisan bill that would trigger new sanctions on energy and financial sectors if the director of national intelligence determines Russia is continuing to interfere.
“Clearly the House is a different situation,” he said.
Russia’s benchmark stock index jumped on the news of the probable delay, climbing 1.4% by 3.30pm in Moscow. Yields on 10-year government bonds dropped nine basis points to 8.55%, the lowest in six weeks.
“The delay is obviously good news for the market” said Credit Suisse analyst Alexey Pogorelov. “The initiative in Congress had a lot of support but it seems to have lost momentum. The question now is whether the agenda will be the same after the midterm elections.”
THE QUESTION NOW IS WHETHER THE AGENDA FOR SANCTIONS WILL BE THE SAME AFTER THE MIDTERM ELECTIONS
The proposals have mushroomed after reports of Russia’s continued efforts to sway US elections and attempted hacks targeting US senators, and after intelligence agencies’ conclusion that Russia sought to meddle in the 2016 presidential election. Legislators from both parties have also been sharply critical of Trump’s meeting with President Vladimir Putin in Helsinki in July, saying the US leader has not done enough to hold Russia accountable.
Van Hollen said the two main sticking points on the bill are concerns over sanctions on government bonds and the energy sector. The sovereign debt measure has already been modified to apply sanctions only to new bond issues. The draft includes restrictions on top state banks that could shut them out of the world financial system.
A separate proposal in Senate, dubbed the “bill from hell”, would also target Russia’s debt and state banks, while imposing new sanctions on oligarchs and political figures who aid corrupt activities on Putin’s behalf, and requiring of the US state department to determine if Russia should be designated as a state sponsor of terrorism. The measures would take effect upon passage of the law, but Senate leadership has suggested this plan would be watered down if it were to come up for a vote.
The delays facing the congressional proposals do not affect a separate package of sanctions the administration is due to impose without legislative approval. Those are part of the response to a nerve-agent poisoning in the UK in March and could hit near the end of November, possibly adding limits on trade, diplomatic ties and air service.