The U.S. is holding off on sanctions against some Russian companies because it doesn’t want to hurt American holders of their debt, according to Fitch Ratings.
“We’ve heard quite a lot of anecdotal evidence that there’s actually a lot of consultation with big investors and bondholders in terms of what sanctions might be imposed by the U.S.,” James Watson, a managing director at Fitch, told reporters today in London. “It seems there has been a significant push back on potentially sanctioning companies that have significant foreign debt.”
Fitch has spoken with investors over the past month, he said.
The Obama administration on April 28 named seven individuals, including Igor Sechin, chief executive officer of oil giant OAO Rosneft, and 17 companies linked to Putin’s inner circle, such as InvestCapitalBank and Volga Group. Other companies include OOO Stroygazmontazh, a gas-pipeline builder, OAO Sobinbank and ZAO Zest, a leasing company.
The average yield on Russian corporate bonds fell 11 basis points to 7.10 percent yesterday after reaching a 2 1/2-year high of 7.21 percent on April 28, according to JPMorgan Chase & Co. indexes. An equivalent gauge of the nation’s government debt fell 20 basis points this week from 5.85 percent, the highest since October 2011.
“It’s significant that in the list we’ve seen so far, we haven’t seen any companies that have significant amounts of foreign debt,” Watson said.
Treasury spokeswoman Hagar Chemali declined to comment beyond remarks that Treasury Secretary Jacob J. Lew made on April 28.
“Obviously, there’s two sides to every transaction. The goal is to have the maximum impact in Russia and to have as little damage done to the global economy,” Lew told NBC News/MSNBC in an interview. “I’ve talked to quite a few American CEOs in the last couple of weeks. And while they do express concerns -- on some occasions -- in terms of what it means for their business, they also express a deep understanding of the geopolitical importance of what we’re doing.”
U.S. Commerce Department officials didn’t immediately respond to a request for comment.
American companies and individuals aren’t banned from doing business with Rosneft as the sanctions against Sechin don’t apply to the oil producer, a U.S. Treasury official said April 28, requesting anonymity to provide additional details on the sanctions announcement.
The yield on Rosneft’s $2 billion 2022 Eurobond fell 14 basis points this week after reaching a record 7.02 percent on April 25, according to data compiled by Bloomberg. The company sold $6 billion of dollar-denominated securities in 2012, the only year that it tapped international bond markets.
U.S. companies are prohibited from doing business with individuals and entities on the sanctions list, and all assets of those designated that are within the U.S. jurisdiction must be frozen, according to the U.S. Treasury.
“The U.S. government’s very, very eager that companies with traded assets are excluded” from sanctions, to limit the impact on institutional investors and U.S. and European interests, Tim Ash, the London-based head of emerging markets research for Standard Bank Group Ltd., said April 28.
Officials from the Treasury Department and the National Security Council met in Washington earlier this month with mutual-fund and hedge-fund managers to warn them of sanctions, according to a person who attended.
“We don’t like the idea to have sanctions,” Emma Marcegaglia, president of BusinessEurope, which advocates on behalf of companies in EU nations, told reporters today in Washington. She said the Brussels-based organization will defer to the European Commission’s actions on economic sanctions. “The idea here is not to destroy the Russian economy,” she said. The goal is to strengthen Ukraine, she said.
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