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trading markets (mirroring the impact of the sanctions imposed on Venezuela in early February) or prohibit owning the bonds altogether. Just after the Venezuelan sanctions were imposed, global secondary trading of Venezuelan sovereign debt grinded to halt — the high concentration of trading within the US greatly complicated the buying and selling of Venezuelan debt on a global scale, leaving investors trapped.
Investors are worried that what happened to Venezuela will happen to Russia, but the two countries are not in the same position. Washington’s motivation behind sanctioning Venezuela’s national oil company PDVSA and Caracas’s sovereign debt was to squeeze the oxygen out of president Nicolas Maduro’s regime to cause a regime change. No one can reasonably expect the sanctioning of OFZ’s to lead to any major change in behaviour from Moscow. No wonder Putin was so happy to boast about his cash reserves: not only do they protect investors from default, they insulate Moscow from US political pressure and inure it to Washington’s bullying.
Still, limitations on American engagement with Russian debt will undoubtedly impact liquidity, sovereign yields, and the ruble; indeed they already have: those high yields OFZ pay are a result of the sanctions regime. But the CBR’s cash pile and low external debt mutes the impact of possible sanctions.
On top of this, American OFZ holders are more likely to bear the brunt of the pain caused by any penalties than the Kremlin. The bottom line is that Venezuela and Russia are in entirely different positions. Venezuelan was sanctioned, but that doesn't mean Russia will be.
Losing capital and passing up on opportunities are part of the investment game. The cloud of sanctions hanging over the Russian bond market has lead some to calling the bonds “un-analysable.” However, Russia’s domestic economic picture remains fundamentally sound. Making investment decisions based on exogenous events is speculative as the sanctions are unknowable and unpredictable. Any decision— buy, sell or hold —is a bet in itself.
2.4 Russian partners sue Baring Vostok in Far East court, threaten to undermine role of UK law in Russian disputes
The Russian partner in the dispute with private equity fund manager Baring Vostok Capital Partners (BVCP) has brought a legal case in Russia’s Far East that threatens to undermine the widespread use of London in dispute arbitrations.
14 RUSSIA Country Report April 2019 www.intellinews.com