European banks refuse to place Russian government bonds

Major European banks such as BNP Paribas, Credit Suisse Group AG, Deutsche Bank AG, HSBC and UBS Group AG have refused to place Russian state bonds, the WSJ reports with reference to informed sources.

It is reported that the banks took the decision, taking into account Brussels' recommendation. Recall that the European authorities didn’t impose a ban on the placement of government bonds of the Russian Federation, but Brussels expressed its concern that the proceeds may be used by Russian state-owned companies, which are included on the sanctions list.

In addition, European banks are worried that the US authorities will be able to impose multi-billion dollar fines on them in case of violation of the sanctions, as it has already happened with BNP Paribas SA and HSBC Holdings PLC, RBC reports. It is worth noting that earlier the US authorities also recommended the US banks to refuse placement of Russian securities.

The associate professor of stock markets and financial engineering of RANEPA, Vasiliy Yakimkin, in an interview with a correspondent of Vestnik Kavkaza expressed the view that such a decision of the European banks is creating big obstacles for Russia. "It's like a hit below the belt. The US literally blackmailing financial institutions and lending organizations around the world to prevent Russian lending. This is a violation of any of the principles existing in the world, all the arrangements," he said.

"I think one can find violations somehow and appeal to the WTO, but then a second question arises: 'And who are the judges?' Who should we contact to resolve a matter not involving the Americans? So I think Russia's only choice is to pay more attention to Asia," the expert said.

According to Yakimkin, Russia has several options in this situation. "First and foremost, eurobonds should not be denominated in dollars, because transactions take place via SWIFT, and the US tracking system will notice it. Therefore it is necessary to nominate them in Asian currencies. There are a lot of countries, which are more or less loyal to us. After all, we can place bonds in the Russian credit institutions such as Sberbank, VTB and Alfa-Bank. The amount is rather small, so I think there should be no problem," the economist said.

"In general, these sanctions are a very serious problem. Several Chinese banks are ready to open a credit line for us, but they are trying to extract additional benefits. So this problem is very serious. I think Russia must show greater rigidity and pursue its interests in every possible way," the economist said.

In this regard, the expert expressed concern that the West is ready to go to any restrictive measures against Russia. "It is necessary to stimulate China, they are preparing an analogue of SWIFT. I think that they can go to the freezing of some of our assets in Western banks in addition to disconnection from SWIFT," Vasily Yakimkin concluded.

The Associate Professor of the stock markets and financial engineering department of the Faculty of Finance and Banking of RANEPA, Sergey Hestanov, in his turn, noted that "the main problem, which emerged at the end of 2014, when sanctions were imposed, is due to the fact that Russian companies have been unable to refinance their earlier loans". 

"Accordingly, it requires the consolidation of foreign currency earnings and limits on the development of the company's plans. It's not a disaster, although it has made operational activities more difficult. To date, the majority of Russian companies have already adapted to this mode. The informal ban, which was entered by the US and EU authorities, lies entirely in the context of their policies," he said.

"It is interesting that many Chinese banks have supported this unofficial ban, refraining from lending to Russian companies," the economist pointed out.

He recalled that "before the 1970-1980s companies were developed on their own funds and it is a common practice." "Now they just have to review their strategies and to be developed by their own means, which companies should have if they are profitable," Sergey Hestanov concluded.