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LONDON — President Joe Biden will issue an executive order on Thursday authorizing the U.S. government to sanction any sector of the Russian economy and barring U.S. banks from participating in the primary markets for rouble-denominated bonds.

It does not however prevent them from buying the debt in secondary markets, Reuters reported.

Here is a selection of quotes on the subject:

CHRISTOPHER GRANVILLE, TS LOMBARD

“We estimate that these sanctions on the primary OFZ market will lead to the (central bank) policy rate being 50 bps higher than it would otherwise have been.

“The sanctions are calibrated to be serious but not too serious. It’s serious because it’s not just another round of political sanctions targeting a few officials or blacklisting companies no one has ever heard of.

“They have gone for real financial sanctions designed to harm Russia by raising its borrowing costs and weakening the rouble.

“But if you just sanction primary issuance, international investors will continue buying in secondary markets.”

HASNAIN MALIK, HEAD OF EQUITY RESEARCH AT TELLIMER

“Restrictions on purchases of new sovereign debt is hardly a potent punishment for an economy running less than a 1% fiscal deficit and with under 20% debt to GDP.

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“At best, it is a signal that the U.S. can escalate its financial measures against Russia, but there is little here to shake the investment case in non-sanctioned Russia.”

VLADIMIR TIKHOMIROV, BCS GLOBAL MARKETS, MOSCOW

“If non-residents can’t buy new Russian rouble debt, then those will not be included in international indexes so the paper will trade at a discount. This will increase the cost of the finance ministry’s borrowing.”

ISKANDER LUTSKO, ITI CAPITAL, MOSCOW

“As expected. So there’s not much of a market reaction but the U.S. rhetoric keeps alive the risk of sanctions on secondary markets. It now depends on (President Vladimir) Putin’s response — will he cancel the U.S.-Russia summit? If so, the risk premium will remain.”

REGIS CHATELLIER, OXFORD ECONOMICS

“My take on this is that the impact of these new sanctions will have limited impact on the Russia. Local rates could widen a bit, as foreign investors would be barred from participating in OFZ auctions, but ultimately demand for OFZ would likely to find its way via the secondary market.

“The external backdrop is quite favorable for Russia, starting with relatively high oil prices and decent growth prospects this year, while international reserves remain very high. In a nutshell, the downside and the damage for Russia is likely to be limited.”

TIMOTHY ASH, BLUEBAY ASSET MANAGEMENT

“So U.S. institutions cannot buy Russian sovereign debt in primary issuance but can get their Russian bank friends to buy it for them in primary, give them a fee, and then buy it in the secondary.

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“Guys, come on, you need to do better than this.

“The language should have stated that participation in primary market and subsequent ownership in these deals was prohibited.”

LIAM PEACH, CAPITAL ECONOMICS, LONDON

“To the extent that the rouble comes under significant pressure and the central bank becomes more concerned about the outlook for inflation, we think it would argue in favor of more aggressive monetary tightening. This is not our baseline forecast but wee expect a 50bp interest rate hike next week to 5.00%.”

DMITRY DOLGIN, ING BANK, MOSCOW “The positive is that non-residents can still participate in the secondary OFZ market and don’t need to get rid of securities they have already purchased. But the negative is no one can guarantee that this will be the case. U.S. investors could see the current package of sanctions as a window of opportunity to get out of Russia.

I don’t see interest rates being raised just because of these sanctions. It will make sense only if the rouble weakens sharply.”

ARTHUR BUDAGHYAN, BCA RESEARCH

“The situation is escalating… economic sanctions are a pretty easy call if there is not going to be military action.”

(Reporting by Marc Jones, Tom Arnold and Sujata Rao in London; Elena Fabrichnaya and Andrey Ostroukh in Moscow; editing by Carmel Crimmins and Toby Chopra)

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