BOFIT Viikkokatsaus / BOFIT Weekly 2018/16

Russia has extended the process of handling a draft law that would impose new sanctions on the United States and possibly other countries. The lower-house Duma is not expected to take up the matter until mid-May, and the proposal has already raised criticism among several Russian firms and many experts. The bill's proposed menu of sanction options includes restrictions on imports, exports and public procurements. The Russian president would then decide which measures, if any, to implement. Some of the proposed measures would have little effect as they are already in place as earlier sanctions or have been introduced as import substitution efforts (for example, several food items subject to import restrictions).

The US was also expected to again announce new sanctions on Russia at the beginning of the week, which would now be related to Russian support for the Syrian government. Thereafter, the US administration said that it was still only considering new sanctions.

With new sanctions at least postponed by both sides, the nervousness on Russian markets subsided a bit in recent days. The Moscow exchange's RTS index recovered and the ruble's exchange rate climbed slightly from last week's lows. The finance ministry's daily forex purchases, however, have ceased temporarily in order to lessen depreciation pressures on the ruble's exchange rate.

Russia is also considering measures to support firms directly targeted by previous US sanctions. One proposal calls for setting up Russian special economic zones similar to tax havens elsewhere. Firms subject to sanctions would be allowed to transfer their operations and capital from foreign tax havens. It has also been envisaged that firms could be supported through e.g. public procurements and a new bank that is in the process of being established to meet the needs of the defence industry.