US Steps Up Sanctions, Bars Investors From Buying Russian Debt
2022.06.07 18:26
© Bloomberg. Pedestrians walk by Saint Basil’s Cathedral on Red Square in Moscow, Russia, on Sunday, May 2, 2021. Facing a rising wave of Covid-19 infections and a vaccination rate that isn’t keeping up, the Kremlin is trying to contain the epidemic without alarming Russians.
(Bloomberg) — The US Treasury stepped up its financial sanctions on Russia, restricting investors from buying the country’s debt in the secondary market, bringing trading activity almost to a halt on Tuesday as investors scrambled to understand the restrictions.
The new guidance means US firms can hold or sell Russian debt, but can’t buy it, according to a spokesperson for Treasury’s Office of Foreign Assets Control. The guidance applies to both corporate and sovereign debt as well as equities, the person said.
OFAC’s update on its website late Monday said US market participants are prohibited from purchasing both new and existing debt and equity securities issued by a Russian Federation entity.
But investors can still sell such assets, or facilitate their sale, to non-U.S residents and may continue to hold them, according to the statement. The additional sanctions caught investors by surprise on Tuesday, prompting many to contact lawyers to determine what the new rules entail, according to people familiar with the matter.
“Markets usually evaporate almost immediately but it’s always good policy to allow wind down for at least some time,” said Brian O’Toole, a former senior adviser at OFAC. “Probably no one will buy the debt but it’s still good policy to let folks offload if they can rather than sticking them immediately with a worthless asset.”
The additional sanctions will come as a further blow to funds holding Russian bonds. The US Treasury barred US banks and individuals from accepting bond payments from Russia’s government last month, pushing Russia closer to a default.
Russia’s bonds fell around 3 cents on the dollar on Tuesday as banks and brokers marked down their holdings.
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