The UK authorities are going to discuss a ban on selling Russian sovereign debt through clearing houses in the City of London. The City banks have been acting as book runners of Russian bond sales. This proposal has been submitted thrice to the UK Prime Minister by Tom Tugendhat, the foreign affairs select committee chairman. However, the Cabinet of ministers had taken no notice of the matter until foreign secretary Boris Johnson described this idea as worthy.
After Boris Johnson got interested in the proposal, the ban is now being discussed among top policymakers. Importantly, amid international sanctions nearly half of Russia’s debt was sold in London and bought by London-based investors. It has been one of few legal sources of income in a foreign currency. As a result, sanctioned Russian banks, for example VTB, are allowed to arrange the issue of the Russian bonds. Tugendhat spotted this loophole in the EU and UK legislation. “At present, Russia can borrow in EU and US capital markets despite western sanctions and then can support the sanctioned Kremlin-linked banks and energy companies that can no longer do so,” he said. On the back of escalating diplomatic tensions between the UK and Russia, Russian bond sales will be unavailable to Euroclear and Clearstream, the key western clearing houses, in the near future.
