The Russian government has sent out an additional five requests to investment banks for its potential $3bn Eurobond sale, prompting speculation that it hopes to undermine the Western sanctions regime in the process.
The Ministry of Finance has added Canada's Scotiabank, Italy's UniCredit, Japan’s Mizuho Financial, Agricultural Bank of China and China Construction Bank to a list of 23 other lenders who were approached about helping the sovereign to tap international credit markets.
The presence of three lenders from China and Japan indicates the Kremlin is still trying to partly pivot its financing needs from Asia.
Commentators also regard Russia as trying to leverage international banking interest in its external bonds to undermine the economic sanctions imposed on it by Western governments 18 months ago for its actions in Ukraine.
The government in Moscow is looking to raise up to $3bn by issuing its first Eurobonds since 2013 in a bid to help shore up its growing deficit and to set a benchmark for domestic corporate issuers. Besides Russia's state-owned Sberbank, VTB and Gazprombank, proposals have been sent to a whole roster of the biggest banks in Europe and the US, including Goldman Sachs, Barclays, BNP Paribas, Bank of America Merrill Lynch, HSBC and UBS.
"Moscow is playing with the West now, and trying to force the issue over sanctions," Tim Ash, chief strategist at Nomura International, wrote in an e-mailed note. "Sending a message, 'look all your banks now want to do business with us, so why not let them.'"
Russia last sold a Eurobond in 2013 worth $7bn and with the participation of VTB Capital, Deutsche Bank, Barclays, Royal Bank of Scotland, Gazprombank and Renaissance Capital.
Formally, the EU and the US sanctions do not target sovereign issues by the Russian government, but they do limit debt and equity financing for a number of state-controlled corporate and banking majors.
Lawyers surveyed by Reuters point to a loophole which would allow forex proceeds of the sovereign Eurobond issue to be channelled down to sanctioned companies, presenting a challenge to the banks involved in the issue and the governments that initially set the sanctions.
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