Russia tells Washington curbs on its banks would be act of economic war

Russian Prime Minister Dmitry Medvedev holds a meeting on the consruction of a transshipment terminal for liquefied natural gas in Kamchatka region, in Petropavlovsk-Kamchatsky, Russia August 10, 2018 - REUTERS

MOSCOW (Reuters): Russia warned the United States on Friday it would regard any U.S. move to curb the activities of its banks as a “declaration of economic war” and would retaliate, as new sanctions took their toll on the ruble and U.S. lawmakers threatened more.

The warning, from Prime Minister Dmitry Medvedev, reflects Russian fears over the impact of new restrictions on its economy and assets, including the ruble RUB= which has lost nearly six% of its value this week on sanctions jitters.

Economists expect the Russian economy to grow by 1.8% this year. If new sanctions proposed by the U.S. Congress and the State Department are implemented in full, which remains uncertain, some economists fear growth could weaken to almost zero.

President Vladimir Putin discussed what the Kremlin called “possible new unfriendly steps by Washington” with his Security Council on Friday.

Moscow’s strategy of trying to improve battered U.S.-Russia ties by attempting to build bridges with President Donald Trump is backfiring after U.S. lawmakers launched a new sanctions drive last week because they fear Trump is too soft on Russia.

That in turn has piled pressure on Trump to show he is tough on Russia ahead of mid-term elections. The State Department announced new sanctions on Wednesday, blaming Moscow for the poisoning of a Russian ex-spy in Britain in March.

On Friday, the White House strongly condemned the poisoning incident, which a spokesman for Trump’s National Security Council called “a reckless display of contempt for the universally held norm against chemical weapons”.

The new sanctions pushed the ruble to two-year lows and sparked a wider sell-off over fears Russia was locked in a spiral of never-ending sanctions. Russian Foreign Minister Sergei Lavrov complained about the new sanctions in a phone call on Friday to U.S. Secretary of State Mike Pompeo.

Pompeo and Lavrov discussed sanctions and Syria’s civil war during the call, State Department spokeswoman Heather Nauert said in a statement. Pompeo reiterated that Washington wanted a better relationship with Moscow and he and Lavrov agreed to future dialogue, she said, without elaborating.

Separate U.S. legislation introduced last week in draft form by Republican and Democratic senators, dubbed “the sanctions bill from hell” by one of its backers, proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of the dollar. Medvedev, speaking on a trip to Russia’s far east, said: “I can say one thing: If some ban on banks’ operations or on their use of one or another currency follows, it would be possible to clearly call it a declaration of economic war.”

“And it would be necessary, it would be needed to react to this war economically, politically, or, if needed, by other means. And our American friends need to understand this.”

Pro-Putin lawmaker Vyacheslav Nikonov who in 2016 prompted the Russian parliament to erupt in applause when he announced Trump had won the White House, called for a tough response.

“War is war,” Nikonov wrote on Twitter. “We need to rid ourselves of any dependency on our rival as much as possible and stop helping them. Our response must not just be symmetrical but preventative. We need to respond now and toughly.”

FEW GOOD RETALIATORY OPTIONS

In practice however, there is little Russia can do to hit back at the United States without damaging its own economy. Officials in Moscow have made clear they do not want to get drawn into what they describe as a mutually damaging tit-for-tat sanctions war.

The threat of more U.S. sanctions kept the ruble under pressure on Friday, sending it crashing to its lowest since June 2016 before it recouped some losses. “The Russian currency has been caught in a perfect storm of weakening crude oil prices and the new U.S. sanctions, in addition to the threat of even tougher punitive measures in the coming months,” said Lilit Gevorgyan, economist at IHS Markit.

The Russian central bank said the ruble’s fall to multi-month lows on news of new U.S. sanctions was a “natural reaction” and that it had the necessary tools to prevent any threat to financial stability.

Central bank data showed on Friday it had started buying less foreign currency on Wednesday, the first day of the ruble’s slide, to try to tamp down volatility.

Analysts doubt, however, that the authorities will take much action to support the falling ruble, as they decided not to intervene during a similar sell-off in April, which was also driven by U.S. sanctions.

The fate of the U.S. bill that would tighten sanctions much further is not certain. The full U.S. Congress will not be back in Washington until September, and congressional aides said they did not expect the measure to pass in its entirety.

While it was difficult to assess so far in advance, they said it was more likely that only some of its provisions would be included as amendments in another piece of legislation, such as a spending bill Congress must pass before Sept. 30 to prevent a government shutdown.

Group asks Trump to unblock 41 Twitter users after court ruling

WASHINGTON (Reuters): A US free speech group on Friday asked President Donald Trump to unblock 41 Twitter users after a federal judge in May ordered him to restore access to a group of individuals who filed suit.

US District Judge Naomi Reice Buchwald in Manhattan ruled on May 23 that comments on the president’s account, and those of other government officials, were public forums and that blocking Twitter Inc users for their views violated their right to free speech under the First Amendment of the US Constitution.

The Knight First Amendment Institute at Columbia University on Friday sent the Justice Department a list of 41 accounts that remain blocked from Trump’s @RealDonaldTrump account. The seven users who filed suit had their accounts unblocked in June.

“As the district court has held, the First Amendment prohibits the president from blocking Twitter users simply because they’ve criticised him,” said Katie Fallow, senior staff attorney at the Knight Institute.

The White House did not immediately comment on Friday.

The blocked users include a film producer, screenwriter, photographer and author. “It appears to us that all or nearly all of these individuals were blocked from the @RealDonaldTrump account because they criticised President Trump or his policies,” the group said Friday.

The group said the list was not comprehensive.

Trump has made his Twitter account, with 53.7 million followers, an integral and controversial part of his presidency, using it to promote his agenda, announce policy and attack critics. He has blocked many critics, preventing them from directly responding to his tweets. The Justice Department said in an appeal filed on Tuesday that the ruling was “fundamentally misconceived.”

The appeal said Trump’s account “belongs to Donald Trump in his personal capacity and is subject to his personal control, not the control of the government.”

The appeal compared Trump’s actions to a presidential address by John F. Kennedy at his Cape Cod home. “It plainly would not violate the First Amendment for him to exclude certain members of the public from his own property because they had previously criticised him,” the Justice Department said.

Buchwald rejected the argument that Trump’s First Amendment rights allowed him to block people with whom he did not wish to interact.

Trump could “mute” users, meaning he would not see their tweets while they could still respond to his, she said, without violating their free speech rights.