MOSCOW – Russia is ready to absorb the blow from any new sanctions the US throws its way, according to Moody’s Investors Service.

Measures to cut down holdings of Treasuries and reduce exposure to the dollar have made the economy less vulnerable to the threat of deeper penalties, Moody’s analyst Kristin Lindow said in an interview. The country could even weather the unlikely scenario of sanctions on sovereign debt recently proposed by US lawmakers, she said.

The central bank has accelerated efforts to safeguard its financial system since Washington blocked the country’s biggest aluminum producer from accessing capital markets in April, sending investors fleeing from the country’s assets. Since then Russia appears to have sold four fifths of its cache of US government debt, an amount totaling $81-billion.

“When sanctions were imposed in April, it became clear that transactions in dollars could be problematic to entities and individuals in Russia, so they are planning accordingly,” Lindow said by phone from New York. “I think that is something any responsible policy maker would do.”

Moody’s put Russia on a positive outlook in January, setting it on course for a possible escape from junk in the next 12-18 months. S&P Global Ratings lifted the nation to investment grade earlier this year.

Yields on 10-year ruble bonds have climbed to a 12-month high since a bipartisan group of senators introduced legislation on Thursday to impose sanctions for Russia’s interference in US elections. Measures listed in the bill include sanctions on new Russian sovereign debt and energy projects. Lindow said lawmakers are unlikely to target government bonds after the Treasury warned earlier this year of the potential for destabilizing global markets.

“I think Rusal was quite a lesson for them, that they should look very carefully at how far-reaching the consequences can be,” Lindow said. “I think the impact was bigger than they anticipated.”

BUYING YUAN
In addition to selling Treasuries, Russia has boosted the share of the yuan in its international reserves and pushed for payments in local currencies with many of its trade partners. The government has also started testing a local alternative to the SWIFT payment system used for international banking transactions.

President Vladimir Putin said late last month that Russia won’t make “any sharp movements” or abandon the dollar, but will take steps to minimize risks. Russia will continue to use the dollar as long as the US authorities don’t ban transactions, he said.

Analysts at Citigroup Inc. estimated that Russia’s borrowing costs could rise by 2 percentage points if the latest bill passes into law. Lindow says the country has enough liquidity locally to keep selling new ruble debt, but other borrowers in the market may find themselves crowded out. After an initial shock, markets will adjust to the measures as they did after the US first began implementing sanctions on Russian companies and individuals in 2014 over the Kremlin’s annexation of Crimea, she added.

“The Bank of Russia has been through that crisis already, they know things worked out well then,” Lindow said. “I’m sure the same kind of preparation is being done this time.”