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This is Why Selling Russia-Held US Debt is 'Unrealistic' Response to Sanctions

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Selling United States Treasuries from Russia’s reserves will not be an efficient response to the recent anti-Russian sanctions imposed by Washington, said Nikita Maslennikov, an expert at the Institute of Modern Development.

On Thursday, outgoing US President Barack Obama announced the expulsion of 35 Russian diplomats, the closing of two Russian diplomatic compounds and new sanctions against six Russian individuals and five entities, including the GRU (the Main Intelligence Directorate) and FSB (the Federal Security Service), over Moscow's alleged interference in the November US presidential election, which the Kremlin has denied.

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"Reserving the right to retaliate, we will not resort to the level of irresponsible 'kitchen' diplomacy and further steps toward the restoration of Russian-US relations will be built on the basis of the policy carried out by the administration of President Donald Trump," Russian President Vladimir Putin said Friday.

Russia will not expel anyone as a response to US sanctions against Moscow over alleged hacking, Putin added.

However, many experts and analysts suggested that an adequate response would be selling all US Treasuries from the Russian reserves.

"I cannot understand such a recipe. As for the Russian Central Bank’s operations with US Treasuries, they run as usual, according to the situation in the market. This year, Russia shortened its positions in these obligations due to the market environment," Maslennikov told RIA Novosti.

The expert also took a note of China, currently the world’s biggest holder of US Treasuries.

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"China has a rational approach to these obligations and carries out transactions when the situation is advantageous. This year, Beijing needed additional money to support its economy and it sold $300 billion in US Treasuries. Now, they aren't selling them because it is not necessary," he pointed out.

Maslennikov underscored that by working with US Treasuries every central bank puts its interests and goals first.

"I think that such a recipe is unrealistic. The situation is much more complicated, it is multidimensional," he said.

The expert explained that even if Russia sold out all its reserves of US Treasuries this would have almost no effect on the situation in the US economy.

"Some people believe that we would deliver a heavy economic blow to the US by selling its obligations. I think that taking into account Russia’s reserves of US treasuries [$74.6 billion as for October 2016] this would be unnoticed by the US Federal Reserve that currently holds $4.5 trillion," Maslennikov concluded.

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