The curbs on U.S. banks’ purchases of some bonds apply to a small portion of the market but could signal a sharper aim at Russia’s access to global capital.
The Biden administration on Thursday barred American banks from purchasing newly issued Russian government debt, signaling the deployment of a key weapon in Washington’s intensifying conflict with Moscow — threatening Russia’s access to international finance. The curbs on debt were part of new measures against Russia that primarily involved sanctions on dozens of entities and individuals and the expulsion of 10 diplomats from the Russian embassy in Washington. The moves aim to exploit Russia’s weak economy to pressure Moscow to relent in its campaign to disrupt American political life and menace Ukraine. The limits on debt purchases, which apply to bonds issued by the Russian government after June 14, could raise the cost of borrowing within the Russian economy, limiting investment and economic growth. For now, that threat remains minuscule. Russian government debt held outside the country amounts to about $41 billion, according to the Russian central bank — a relative pittance in the global economy. For comparison, the U.S. Treasury issued a total of $274 billion in sovereign debt over the first three months of this year alone. Russia’s government sells most of its debt domestically, and it finances much of its operations through the sale of energy. American investors hold only 7 percent of Russian government debt denominated in rubles, according to Oxford Economics in London. Yet as a symbolic step, experts said, the measures outlined by the Biden administration signal its willingness to engage in an incremental approach that could lead to harsher measures, such as imposing tougher curbs on Russia’s access to capital markets, if Moscow does not moderate its activities.
