Is Sanctioning Russian Sovereign Debt Such a Big Deal?

March 18, 2021
Timothy Ash
This is a summary of an article originally published by bne IntelliNews.

The author, a senior sovereign strategist at BlueBay Asset Management in London, writes that the question of sanctioning Russian sovereign debt is met by the Russian influence lobby "with the view that this is such a terrible idea, and a big hurdle to cross." Ash, however, disagrees. “First, usually the argument is put that this is the nuclear option," one the U.S. Treasury should hold in reserve for use "against new Russian malign actions. This kind of ignores the point that there are gears within the gears when we think of the sanctions regime: first sanctioning primary ruble debt, then sanctioning secondary dollar and then ruble debt.” Second, Ash believes sanctioning primary ruble debt at the next step doesn't hurt or disadvantage U.S. institution. "Third, it’s hardly nuclear, as the U.S. has already sanctioned dollar primary. The expectation surely is that ruble primary is next. ... Fourth, the argument that sanctioning sovereign debt somehow undermines the dollar’s position as a reserve currency surely no longer holds." Fifth, sanctioning ruble primary debt would be easier and more attention-grabbing than sanctioning oligarchs or financial entities, and finally, "why are U.S. public sector pension funds still allowed to invest in Russian sovereign debt?”

Read the full article at bne IntelliNews.


Timothy Ash

Timothy Ash is a senior sovereign strategist at BlueBay Asset Management in London.

Photo by JetraTull shared under a Pixabay license. The opinions expressed herein are solely those of the author.