Russia Instant Insight: Implications of "Kremlin List" published by US Treasury on 29 January
On 29 January, the US Treasury published the so-called “Kremlin list” of top Russian officials and oligarchs that can potentially become subject to further US sanctions in the future. The market reaction to the publication of the list was cautious, which we think is justified in the short term. The sweeping nature of the list, which includes practically all Russian oligarchs, may translate into lower outflows via the financial account in the future. However, they may also complicate raising capital abroad and result in higher cost of external financing for private Russian borrowers, despite the recent robust demand for Russian Eurobonds.
- The US Treasury has prepared the “Kremlin list” under the Countering America’s Adversaries Through Sanctions Act (CAATSA) signed by President Trump in August 2017. Publication of the list does not mean automatic imposition of sanctions. This probably explains the markets’ muted reaction to the publication.
- The list of the Russian politicians is a comprehensive list of the Russian political elite which includes all members of the cabinet, including PM Medvedev, and the Presidential Administration, Speakers of both parliament chambers, other top Russian politicians and heads of state-owned Russian companies and banks. President Putin does not appear on the list.
- The most surprising feature of the list is that its part naming Russian oligarchs is simply a copy of the Forbes list of Russian billionaires with the estimated wealth above $1bn, with no particular distinction between those who are closely affiliated to Kremlin and the remaining part of the business elite. It includes 96 individuals.
- Interfax quotes President Putin today as saying that Russia will not take any steps in response to the publication of the list.
- In combination of the second amnesty for capital announced by Putin in late 2017, the publication of the list should lead to further reduction in private capital outflows from Russia, even if the US does not introduce new sanctions against officials and businessmen included into it. However, we think it may also hamper capital inflows.
In the months preceding the publication, Russian official circles and the business community were on the tenterhooks. In particular, many feared that an inclusion of a company’s owner in the list would lead to difficulties in dealing with foreign partners and banks. Concerns regarding future access to international capital markets have probably helped the recent spike in Eurobond placements by Russian corporate borrowers (although robust demand from investors for high-yielding EM corporate debt must be another reason for this).
Following the publication of the “Kremlin list”, markets seemed to breathe out a sigh of relief as no new sanctions came in force. In addition, the European Commission... (please proceed to buy the report to gain access to the remainder of the report)
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