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Although the EU’s sanctions do not explicitly prohibit purchases of Russian government debt, EU officials have privately echoed Washington’s warnings that the proceeds from an offering could be misused, according to two people familiar with the guidance.
If this qualified warning convinces European banks to avoid the sale, Russia could be forced to abandon its first foray into capital markets since the annexation of Crimea in 2014, dealing a financial and political blow to the Kremlin. “It is clear that they don’t want us to take part,” said one banker familiar with the guidance. “We are being discouraged.”
In spite of the warnings, Russia's deputy finance minister, Sergei Storchak, insisted last month that enough foreign banks were still on board to proceed. Meanwhile, Andrei Belousov, an economic aide to Mr Putin, said he did not expect the Treasury’s campaign to drive up Russia's borrowing costs.
Moscow has long sought to undermine the west’s sanctions regime by accessing its capital markets while, at the same time, aggravating divisions between member states over the policy.
But there has so far been little shift in a sanctions policy that has enjoyed strong backing from Angela Merkel, the German chancellor. After extended discussions on Monday, EU foreign ministers reaffirmed that relations with Moscow rested on the implementation of the Minsk ceasefire accord in Ukraine.
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