Sanctions barring US banks and institutional investors from buying new ruble-denominated bonds at Russian government auctions are symbolic at best though they may be a lost opportunity for Americans to invest in such debt, Wexler Capital Chief Investment Officer Steven Keller told Sputnik
NEW YORK (Pakistan Point News / Sputnik - 21st April, 2021) Sanctions barring US banks and institutional investors from buying new ruble-denominated bonds at Russian government auctions are symbolic at best though they may be a lost opportunity for Americans to invest in such debt, Wexler Capital Chief Investment Officer Steven Keller told Sputnik.
The White House outlawed US entities from purchasing the ruble-based bonds on April 15 as part of a host of sanctions aimed at Russia for its alleged cyber-attacks and other hostile acts against American interests.
According to charges laid out by the Biden administration, Russian intelligence was behind last year's massive SolarWinds hack on US information technology systems. Russia was also accused of interfering in the 2020 US election and waging chemical warfare. Moscow has denied the allegations and said it will respond to the US sanctions in kind.
Keller, referring specifically to the bond-related sanctions, described the action by the Biden administration as "more of political grandstanding by the United States that's unlikely to cost the Kremlin much sleep."
Keller said the Biden administration's ban on the bonds "won't make a ripple" with US investors either since not too many participate in such debt.
"If anything, this will limit somewhat the number of international bond offerings that will be open to US banks and institutional investors," he said. "In a dynamic and free market, you want to encourage, not limit, the options for investors, particularly with regard to sovereign bonds."
While the Biden administration sanctioned ruble-based bonds issued by the Russian government at auctions, it left open the secondary market for such debt whereby US investors could still buy such bonds from those reselling them on the open market.
"In a sense, this means you have the sanctions on ruble-denominated bonds and at the same time, you don't have them," Keller said. "Rather than reading this as a move to deliberately confuse the market, I think the Biden administration is taking a wait-and-see approach on how the Kremlin responds to these sanctions, before proceeding with a possible next wave of penalties."
US media noted that the country's investment banks were positive on Russia coming into 2021 in large part because of actions its government had taken to defend against financial pressure from the United States and Europe.
Bank of America had ranked Russia as the best of the big emerging-market countries in a December report, citing its "large positive net foreign assets, the lowest public debt, a small fiscal deficit and even a current account surplus - despite low oil prices."
Russia also represented the 18th-largest component of a widely followed BlackRock Inc. exchange-traded fund invested in emerging-market local-currency bonds.
Prior to the ban by the Biden administration, the previous Trump administration barred in 2018 US financial institutions from taking up bonds of some companies and individuals with ties to the Kremlin in retaliation for alleged election interference and hacking. The following year, the ban was expanded to purchases of new Russian government bonds issued in foreign currencies, such as the Dollar or euro.
"But the repercussions from Russia might be a lot greater if we were to do that," Keller said. "I think the White House has shown its hand for now and there might not be any follow-through for a while."
The US Treasury said this week it was carrying out a review of the United States' various sanctions policies to achieve better outcomes for the nation.
The review seeks to ensure that the implementation and enforcement of sanctions are "relevant, rigorous, and fit to purpose, with the goal of advancing the national security, foreign policy and economic aims of the United States", Deputy Treasury Secretary Wally Adeyemo told US banking executives on Tuesday.