Washington advises US banks to avoid Russian bonds

The US government has advised American banks to stay away from Russia's planned bond issue, citing "high" risks as US sanctions remain on Moscow, sources close to the issue said.

Both the US State and Treasury departments pointed out the risks involved in response to queries from the private sector on the issue, according to the sources yesterday.

Russia is said to be planning a $3 billion bond issue which has reportedly interested US banks.

Read more from our special coverage on "RUSSIA"

• Contagious ills

But with the country under tough sanctions over its invasion and annexation of Crimea from Ukraine in 2014, US businesses have to be wary of breaking Treasury rules on doing business with Russian entities, especially sanctions on Russian oil companies.

According to the sources, the government sees that US banks participating in the bond issue could be acting contrary to US foreign policy interests.

Asked about the warning, a US State Department spokesperson explained that it considered that there remain risks – "both economic and reputational" – associated with doing business with Russia.

"Beyond the due diligence that firms should conduct to ensure that they are not violating US sanctions related to the situation in Ukraine, it is essential that private companies – in the US, EU, and around the world – understand that Russia will remain a high-risk market so long as its actions to destabilise Ukraine continue."

One of the sources said that even if the banks are not specifically prohibited from buying or underwriting the bonds, they have to beware that the money raised by Moscow could go to entities under sanctions.

According to The Wall Street Journal, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley are banks that have been invited to participate in the bond sale.