European Union leaders are considering a ‘clever’ sanctions strategy that will hit Russian banks without jeopardizing bilateral trade, the Financial Times reports.
Although the sanctions options prepared for today’s meeting of EU ambassadors offer five different sectors of the Russian economy for possible restrictions, two pages of the ten-page document obtained by the FT’s Brussels Blog focus on the financial sector:
As we reported here this morning, the main financial proposal would bar all “EU persons” from investing in debt or equity sales made by state-owned Russian banks, which constitute most of the largest financial institutions in the country.
As is our practice, we thought we’d provide a bit more detail on the proposal here on the Blog. The health warning that needs to be attached to this plan, however, is that the likelihood of it being actually adopted remains slim. Thus far, only a small hard-core group of EU countries have supported moving to “phase three” sanctions, which hit entire Russian economic sectors rather than just targeted individuals. Sanctions need unanimity from all 28 EU countries to be enacted.
The meat of the capital markets proposal is pretty straight forward: if a Russian bank that is more than 50 percent owned by the government issues stock or bonds, no European can participate. As part of its impact assessment, the document estimates that between 2004 and 2012, $16.4bn was raised by Russian state-owned financial institutions through IPOs in EU markets. And in 2013 alone, about 47 per cent of all bonds issued by those banks — €7.5bn out of €15.8bn – were issued in the EU.