The Kremlin and the government are preparing in advance for the fact that the US can go under the most severe scenario regarding sanctions measures against Russia, RBC told two federal officials. As the most stringent possible measures in the country's leadership, sanctions are considered against the Russian national debt and Russia's withdrawal from the SWIFT system, both of RBC's interlocutors said. Another possible measure that causes very serious fears is blocking sanctions against the largest Russian banks - Sberbank and VTB, a source close to the Kremlin added.

Preparing for the worst and thinking through the actions in the event of the most negative scenario, the Russian authorities began even before the publication of the "Kremlin report" in January, both federal officials specified in a conversation with RBC. The country's permanent representative to the UN, Nikki Hailey, stated earlier that new sanctions against Russia will be introduced already on Monday, April 16. This time sanctions may be introduced in response to Russia's support of the Syrian leader Bashar Assad. Prior to that, on April 6, Washington held the toughest round of anti-Russian sanctions since 2014, isolating seven billionaire businessmen, 14 companies and 17 senior officials and top-managers of state companies from the American financial system.

Measures against state debt

The Kremlin and the government are calculating two options for possible US sanctions on Russia's sovereign debt. The first - to invest in federal loan bonds (OFZ) will be banned only by US investors, this is a scenario that is applied against Venezuela, says one of the federal officials. In August 2017, the US government prohibited US citizens and companies from making any deals with Venezuela's new government bonds with a maturity of more than 30 days. The second, much more stringent option - the ban on the purchase of the Russian national debt - will be of an extraterritorial nature, in fact also extending to foreign (including Russian) legal entities, he clarifies. The US government can not legally forbid something to individuals outside the US jurisdiction, but it can threaten them with so-called secondary sanctions for dealing with Russian public debt (as, for example, this was done with respect to transactions with Russian defense enterprises).

Now foreign investors hold more than a third of the Russian national debt. The share of non-residents in the OFZ market as of March 1 was a record 34.2% (about $ 41 billion) plus another $ 15 billion invested by non-residents in the Eurobonds of the Russian Ministry of Finance (data of the Central Bank as of the beginning of 2018). The global nature of investments in Russia's national debt was one of the reasons that the US Treasury referred to when, in January, it did not recommend imposing sanctions against Russia's sovereign debt. On April 11, US Treasury Secretary Stephen Mnuchin said his department still does not support such sanctions.

As a protective action, the Russian authorities are considering the possibility of creating a special bank to buy Russian national debt, as well as taking measures that will "close" the names of those who buy Russian national debt, says another federal official.

It would be reasonable to create a mechanism for government interventions in the OFZ market in case of such sanctions against the public debt, Oleg Kuzmin, chief economist of Renaissance Capital for Russia and the CIS, believes, and it would be more logical to do this on the basis of, for example, VEB. It does not necessarily refer to direct lending to the government, but rather to a temporary mechanism for supporting OFZ, whose yields will jump if foreign investors are banned from buying Russian state securities. "It will be difficult for Russian banks to instantly digest such a volume of the released offer of securities, and the mechanism of smoothing such a shock will be appropriate. Then, when the situation stabilizes, it will be possible to resell these OFZs to other banks, "Kuzmin argues.

The special bank for servicing the state defense order has already been established (on the basis of the sanated Promsvyazbank), and the secrecy of part of the public information is used increasingly to protect against sanctions. So, for example, the government allowed the Defense Ministry and special services to at least until mid-2018 to conduct all purchases in closed mode, the authorities also compiled a list of 126 Russian companies and departments that are recommended to transfer purchases to the closed site of the Savings Bank. The Ministry of Finance and the Ministry of Economic Development have drafted government resolutions that limit the disclosure of transactions related to military-technical cooperation with other countries, transactions on state defense order and transactions where one party is a Russian individual or a legal entity entered on sanctions lists, the Bank of Russia reported. Two such resolutions were signed in January.

Another measure - "attracting the money of the population" through the sale to the citizens of OFZ - was discussed back in January, the interlocutor explains. It was about making the mechanism for selling securities "more affordable" within the country, he clarifies. This measure is already being implemented in practice: in February, Prime Minister Dmitry Medvedev instructed the Ministry of Finance to increase the amount of OFZ issue for the population in 2018 to 100 billion rubles. Medvedev also proposed to extend this practice to the regional level "so that the subjects of the Federation were interested in issuing their securities also to individuals, especially since such experience already exists in ten regions and even in one municipality".

Disconnection from SWIFT

The country's leadership still does not exclude that if the sanctions situation develops according to the most severe scenario, then the matter can reach the disconnection of Russia from the inter-bank system of financial communications SWIFT, say both federal officials.

The topic of possible disconnection of Russia from SWIFT is periodically raised starting from 2014, after the accession of the Crimea. During the presidential election in the US in 2016, Moscow seriously feared that if Hillary Clinton wins in the campaign, then the Americans will get Russia cut off from SWIFT, RBC previously told a source close to the Foreign Ministry. However, SWIFT is based in Belgium and does not directly comply with US sanctions legislation.

In late 2017, the head of Sberbank German Gref in an interview with the Financial Times said that possible US sanctions against oligarchs and state corporations would have been "irrational" if they had suggested such measures as the disconnection of Russian banks from the SWIFT system. Gref said that in case of imposing large-scale sanctions, the Cold War may seem like a "child's play". Earlier, in early 2015, the head of VTB Andrei Kostin warned that disabling Russia from SWIFT would be tantamount to declaring war.

The Kremlin and the government fear that the disconnection of Russia from SWIFT may lead to the collapse of the Russian banking system and the stoppage of external payments, especially for gas supplies, says one federal official. In this case, Moscow is considering the possibility of making external payments through agents, the so-called bridge companies (intermediary companies), he explains.

So far there have been only two cases of disconnection of states from the SWIFT system. In 2012, this measure was applied to Iranian banks, in 2017 - against North Korean banks. However, in both cases, sanctions were applied against the countries by the UN, and in the case of Iran, SWIFT fulfilled the EU decision.

The ban on the use of SWIFT can be partially bypassed, an example of Iran shows: not all Iranian banks were cut off from the system, and those that were cut off rented telephone lines from banks of Dubai, Turkey and China to transfer bank messages, The Economist reported, or used other Iranian banks with access to SWIFT as information conductors. In addition, the now closed bank in Bahrain has helped Iranian banks to conceal transactions from regulators for $ 2.7 billion, using some kind of "informal alternative to the SWIFT system, which is difficult to trace," the Washington Post reported this month referring to court materials from the government of Bahrain.

Sanctions against state-owned banks

A serious fear is the possibility of tightening sanctions against the largest Russian banks, primarily Sberbank and VTB, says a source close to the presidential administration, RBC. Now both banks are already under sectoral sanctions, since 2014 restricting their access to the international debt capital markets. However, the ban on correspondent accounts in the US or entering the SDN (Specially Designated Nationals) list is a much more stringent measure that makes international operations virtually impossible. "Of course, excommunication of the largest state banks from the international financial system would be a very painful blow for them, which they seriously fear," Kuzmin said.

The United States already contributed several Russian banks to the SDN list, the largest of which was AB Russia, but there were no public banks among them. What happens in such cases with public companies was shown by the situation of UC Rusal: the company's shares collapsed, foreign investors sell off the paper, foreign counterparts (not only American) sharply cut operations with the company.

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