The U.S. government has warned some top U.S. banks not to bid on a potentially lucrative but politically risky Russian bond deal, saying it would undermine international sanctions on Moscow, people familiar with the matter said.
The move, apparently the first of its kind since the sanctions went into effect, has sent Wall Street bankers scrambling to determine whether the opportunity for new business is worth the political downside of bucking the administration’s warning. The rules don’t explicitly prohibit banks from pursuing the business, but U.S. State Department officials hold the view that helping finance Russia would run counter to American foreign policy.
Russia plans to issue at least $3 billion of foreign bonds—its first international issue since the U.S. and its allies imposed sanctions in 2014 following Moscow’s annexation of Crimea and support for separatists in Ukraine, according to people familiar with the matter.
Russia invited European and Chinese banks to bid on the deal as well as several from Wall Street, including Bank of America Corp, Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley, the people said.
So far, there is no consensus among the Wall Street firms about whether to move ahead. Some bank officials, including at Citigroup, say they won’t participate. Other banks, including Goldman and J.P. Morgan, continue to weigh their options….
U.S. government officials say helping Russia finance its debt would run counter to the objectives of the sanctions.
“It is essential that private companies—in the U.S., EU and around the world—understand that Russia will remain a high-risk market so long as its actions to destabilize Ukraine continue,” the State Department said in a statement to The Wall Street Journal.
The U.S. better be careful. Fueling the idea of financail war may not be such a good idea, especially with China holding $1.3 trillion in US Treasury security debt.
I’m sure Lou Jiwei is taking notes.