Vladimir Putin woos rich investors with promise of foreign-currency bonds
President Vladimir Putin said Russia was planning to issue foreign-currency bonds in 2018 to help wealthy local investors repatriate capital, a gesture of concession as concerns over Western sanctions grow.
"At our last meeting, you asked for convenient mechanisms to bring capital back into Russian jurisdiction and suggested using Russian foreign-currency bonds," Putin said on Thursday at a Kremlin meeting with top business people, including several under sanctions. "I’ve given the order to set the necessary terms and parameters to issue such bonds for Russian investors so they can circulate next year."
The threat of additional penalties by the US on prominent business people has raised anxiety in Moscow and led some to consider bringing funds now held offshore back to Russia. This week, the US treasury expanded restrictions to include several more prominent Russians.
A provision of new US sanctions law gives President Donald Trump’s executive branch until February to identify "oligarchs" close to Putin, who can be slapped with visa bans and asset freezes as further punishment for the Kremlin’s meddling in US elections.
Finance minister Anton Siluanov said a possible issue would include no special terms and would be offered as part of Russia’s plan to raise $3bn abroad in 2018. That means such a sale won’t lead to an increase in the total borrowing program, Siluanov told Bloomberg. The country’s main business group had proposed the securities in the northern hemisphere autumn.
"The fact that this plan has been prepared means that the risk of sanctions is serious," Natalia Orlova, chief economist at Alfa-Bank in Moscow, said by phone. "This means a placement not on international markets, where the prices are set by the demand of global investors, but more among local investors."
Russia plans to issue $7bn in Eurobonds in 2018, of which $4bn will be used to swap for outstanding debt. In June, it sold 30-year foreign-debt debt at a 5.25% yield and $1bn worth of 10-year bonds at 4.25%.
Putin, in power for 18 years as premier or president, has previously backed efforts to repatriate as much as $1-trillion in capital held by companies and high-ranking officials abroad as part of what he’s called the "de-offshorisation" of the economy. Earlier in December, he announced that he would run for another six-year term in the March presidential elections.
The meeting on Thursday was attended by Russia’s wealthiest individuals, such as Alexey Mordashov and Vladimir Potanin. It also included Rosneft CEO Igor Sechin, who is subject to direct sanctions because of his close ties to Putin. Another attendee was Gennady Timchenko, a billionaire who was cited as a member of "the Russian leadership’s inner circle" by the US treasury when it imposed a visa ban and asset freeze on him in March 2014.
"Russia is trying to return part of the money home and reduce the risk of assets being frozen the way it happened with Iran," Alexander Losev, CEO of Sputnik Asset Management, said.
Putin did not provide further details of the plan, but the phrase he used in Russian for the bonds was the same used for eurobonds. He said the plan had been cleared by the central bank and government agencies. "There are no objections to this proposal," he said.
Finance ministry officials had publicly opposed the idea of issuing new bonds for this purpose, saying that existing instruments were adequate for its funding needs.
"It is an old idea, but it will be too hard to convince the buyers that their money is safe in those bonds and can be easily redeemed," said Vladimir Miklashevsky, senior economist at Danske Bank in Helsinki. "Short tenors of 1-5 years could work."
With Olga Voitova and Yuliya Fedorinova