A top Russian official admitted Friday that a new round of U.S. sanctions against his country would do real damage to its economy, and said he hoped U.S. officials would avoid more aggressive measures.
“Foreign investors will hardly participate in our domestic financial market,” Finance Minister Anton Siluanov said, according to state-run TASS, while discussing the prospect of additional sanctions. “The share of foreign investors has been declining in any case.”
Russian President Vladimir Putin has downplayed the significance of U.S. sanctions, while emphasizing that punitive measures cannot constrain his policies. But Siluanov conceded that American officials have one arrow in the quiver that would sting — the sanctioning of Russia’s sovereign debt.
“[H]opefully, that is the measure of last resort, though our overseas partners are considering such legislative initiatives,” Siluanov told Russian media. “I agree that is not very pleasant as we enter the borrowings market more and more each year, and plan to boost those borrowings next year to finance the Development Fund to be used to implement national projects.”
Putin maintains that U.S. sanctions are a “double-edged sword” which has harmed both sides but caused unexpected benefits for Russia as well. “There have been advantages,” he said during an “Ask Putin” event last year. “What are they? For a start, we were forced to concentrate our intelligence, talent, and resources on key areas and not simply rely on oil and gas revenue. What result has this brought? We have seen real production growth in important and complex economic sectors.”
But Siluanov acknowledged a drop in foreign investment, even though the U.S. hasn’t taken the most aggressive financial step. “Previously foreign investors accounted for 33 percent of all investments in the total debt structure, whereas today it equals around 27 percent,” he said.
The U.S. declined to ban the purchase of Russian debt after the Treasury Department warned it could harm other economies due to “negative spillover effects into global financial markets and businesses.”