A ban on trading or owning OFZs, which are Finance Ministry’s workhorse funding instrument for the budget, could cause serious problems. Putin’s new May Decrees call for 8 trillion rubles of additional spending extravaganza over the next six years to transform the economy. To raise this cash, in addition to hiking VAT to 20 percent and squeezing the state-owned enterprises for more dividends, the Finance Ministry plans to more than double its OFZ issues next year to a whopping 2.5 trillion rubles — and a lot of that money is supposed to come from international investors.

Russia transformed its capital markets in 2012, hooking them up to the international clearing and settlement systems of Clearstream and Euroclear that allow investors in London or New York to buy bonds directly from the Moscow Exchange. The high-yielding Russian domestic bonds have been an investor’s favorite until this year. Foreign ownership of OFZ peaked at the start of this year at 34 percent of the outstanding bonds, or around $20 billion. However, as political tensions rose, foreign ownership of OFZ has already fallen and is currently around 27 percent. If DAKSAA is passed, foreign holding of OFZ will have to go to zero leaving the Finance Ministry with a large hole in its funding plans it will struggle to fill.

However, even if the DAKSAA bill is watered down, a lot of damage has already been done. The original 2014 sanctions may have been symbolic, but Russian assets still sold off heavily as compliance was not sure who would be put on the list next. As time passed and there were no new sanctions, compliance relaxed again, but this year there have been four sanctions events – January’s DETER sanctions bill, February’s “Kremlin report,” April’s CAATSA round and DAKSAA.

Even if the latest sanctions are stripped of their sharpest teeth, it seems likely the next round will be tougher still. It’s compliance’s job to contain a bank or fund’s exposure to risk and now all Russian assets look risky. Even if Russia holds its own in this autumn’s battle of words over sanctions, the war will probably continue to escalate and Russia is not famous for backing down when facing a fight.

Ben Aris is the founder and editor of Business New Europe. The views expressed in opinion pieces do not necessarily reflect the position of The Moscow Times.