• Russian bond market closed after invasion of Ukraine
• “Non-enemy countries” may return
• Wall Street banks dare to return – under sanctions
The war with Ukraine that Russia started is still raging. When the country, led by President Putin, sent its troops to Ukraine in February, numerous western countries reacted with severe sanctions, which are still in force. The EU imposed several packages of sanctions affecting individuals, the economy and diplomatic measures to counter Russian activities with serious consequences. In addition, it should be made more difficult for Russia to continue its aggression against Ukraine.
Moscow Stock Exchange reopens Russian bond market – for “non-hostile countries”
For its part, Russia responded with its own measures. The country closed its markets in February to prevent capital from flowing out during the war. Now, however, the Russian Federation wants to open up again. In a recent press release, the Moscow Stock Exchange announced that the Russian bond market would reopen to “non-resident clients from non-hostile countries and non-resident persons whose ultimate beneficiaries are Russian legal entities or individuals.” In addition, the exchange announced that “banks, brokerage and management companies” had started registering “their foreign clients”.
Among the hostile states of Russia, the federation counts numerous EU member states as well as Canada and Japan, countries which, according to BBC News, accounted for 90 percent of investments in Russia last year. As the news channel suspects, the accepted countries could include Turkey and China, as they have not yet imposed sanctions on Russia.
Russian economy shrinks in second quarter
The step towards increased opening could be due to the fact that the Russian economy contracted significantly in the second quarter of 2022. The gross domestic product from April to June fell by four percent compared to the same quarter of the previous year. However, this is less than what economists expected in advance. Nevertheless, economic output fell back to the level of 2018 in the second quarter. The Russian central bank expects the economy to contract by seven percent in the third quarter.
Wall Street banks dare to return
As the Reuters news agency reports, various Wall Street banks have already begun a cautious return to the Russian bond market in the past few days, the agency learned from documents it had at its disposal. All this within the framework of the sanctions that are still in force. With this step, the financial houses want to give investors the opportunity to sell Russian assets, which are now viewed as toxic in the West.
Before the start of the Ukraine war, the Russian Federation had around $40 billion worth of government bonds outstanding, about half of which was held by foreign funds, Reuters reports. With Russia’s invasion of Ukraine and the sanctions that followed, many investors no longer had the opportunity to get rid of their investments, which lost value within a very short time. For this reason, the US Treasury Department, as well as European authorities, have now taken steps to allow banks to conduct transactions in Russia without violating sanctions.
Banks returning include Jefferies, Barclays, Deutsche Bank, Bank of America and JPMorgan, according to Reuters. However, returning to the Russian bond market is complicated even for financial professionals. A Jefferies spokesman told Reuters that the bank was “working within global sanctions guidelines to facilitate our customers’ needs to navigate this complicated situation.”
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