The Sanctions Boomerang But Russia has not stood still. The Central Bank of Russia imposed capital controls so that Russian companies cannot pay interest or principal on international debts. That means those loans and bonds may soon go into default. Many such securities may be stuffed into 401(k) plans of Americans under the umbrella of “emerging markets” funds or ETFs. Even more important is the possibility that interbank lending may start to dry up as Russian banks are frozen and Western banks reduce leverage and shrink balance sheets in order to reduce risk. This will lead to defaults in the...
