John Kerry Threatens US Banks Over Russia Bond Sale

Tyler Durden's picture

Russia wants to sell some bonds and President Obama isn’t happy about it.

Moscow is looking to issue “at least” $3 billion of foreign bonds in what amounts to the country’s first international issuance since the West imposed sanctions on The Kremlin in 2014 after the annexation of Crimea and Russia’s alleged role in “destabilizing” Ukraine (because it was very “stable” before).

Since the sanctions were imposed, relations between Moscow and Washington have only gotten more contentious and when Russia began flying combat missions from Latakia on September 30, it was trotted out as evidence that Vladimir Putin is indeed determined to reassert Russian influence by sheer force.

Meanwhile, the Russian economy is in trouble. Granted, Russia isn’t Brazil and Moscow isn’t running a double-digit budget deficit like Riyadh, but times are most assuredly tough. The ruble has plunged through 75 and will probably see the mid-80s if oil spends too much time in the 20s, inflation is running high, and collapsing crude threatens to weaken Moscow’s fiscal position.

All of that is just fine with Washington and its European allies who attribute a large part of the malaise to sanctions even though slumping crude probably plays a larger role.

It’s against this backdrop that Russia is set to sell $3 billion in debt and officials in the State Department and the Treasury are out warning US banks not to underwrite the deal. “The U.S. government has warned some top U.S. banks not to bid on a potentially lucrative but politically risky Russian bond deal, saying it would undermine international sanctions on Moscow,” WSJ reports, adding that “the rules don’t explicitly prohibit banks from pursuing the business, but U.S. State Department officials hold the view that helping finance Russia would run counter to American foreign policy.”

Russia has invited BofA, Citi, Goldman, JPMorgan, and Morgan Stanley to bid on the business, but Washington’s threats have left the Street in a rather tenuous position. In response to banks’ inquiries as to whether they are allowed to participate, John Kerry’s State Department said this: “It is essential that private companies—in the U.S., EU and around the world—understand that Russia will remain a high-risk market so long as its actions to destabilize Ukraine continue. [There will be] reputational risks of returning to business as usual with Russia.”

“Business as usual” was tens of billions in sovereign issuance and hundreds of millions in investment banking business for US financial institutions.

By warning of "reputational risks" it certainly appears as though Washinton is threatening to ostracize banks that help to arrange deals for the Russian government. Here's Moscow's sharp-tongued foreign ministry spokeswoman Maria Zakharova: "The US is trying to intimidate banks on our bonds."

The worry, apparently, is that The Kremlin will channel the funds to companies currently under sanctions meaning banks "could run the risk of inadvertently violating the sanctions in spirit." We're not entirely sure the best way to promote global security is to forcibly compel banks to help freeze the Russians out of international debt markets at a time when the fate of international peace is effectively in Russian hands thanks to Putin's intervention in Syria.

We're also not entirely sure why the federal government feels like it has the right to dictate with whom private enterprises can do business. Besides, if John Kerry is really interested in curtailing the financial activities of nefarious actors, he should be warning the Russians not to do business with Wall Street - the bankers are much more dangerous than Vladimir Putin.

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Troy Ounce's picture

 

 

China says thank you.

Winston Churchill's picture

Banning Iran from SWIFT was the first major strategic blunder.

Secretariat is about to out gallop that.

cossack55's picture

The neocon scum worry about Iran getting nukes.  I worry about JPM and GS getting nukes.

WayBehind's picture

"John Kerry should be warning the Russians not to do business with Wall Street - the bankers are much more dangerous than Vladimir Putin." BINGO!

Manthong's picture

Oh yeah.. God forbid the non-GMO country with the lowest debt and greatest resources should issue a miniscule bit of debt.

How dare they..

 

Maybe GS could sponsor some new Greece CDO's now

Har.. Har.. Har..   (pirate lingo)

 

new game's picture

message to horse fuckface, you can't corner resource rich bears. your military might is wanning.

 

JRobby's picture

HFF better watch his back for KGB

Western Investment banks through secret networks: "Feeling cut off from the capital markets because of sanctions? Have you burned through your USD reserves and need liquidity?"

Stainless Steel Rat's picture

All horsing around aside, this war horse needs to get off his high horse and stop beating this dead horse.  It is putting the cart before the dark horse of a different color.  He bet on the wrong horse. It really horses my horse that this horse horses the horse when the rest of the horses horse hoarsely. Horse horse horse horse horse horse horse horse horse.

McCormick No. 9's picture

If bankers want to buy Russian debt, no-one is going to stop them. They'll just do it through an intermediary... maybe Iran.

Manthong's picture

how do you spell almost zero risk?

Welfare Tycoon's picture

Don't bite the hand that feeds you, Horse Face!!

Baby Bladeface's picture

Speaking on bonds, claim filed in London in Financial List (is part of Commercial Court) "The Law Debenture Trust Corporation PLC versus Ukraine" regards Ukraine default on $3 billions Eurobonds held by Russia.

http://tass.ru/en/world/857688

Kohiba's picture

Always good to start the day off with a laugh, thanx bud!

DownWithYogaPants's picture

Debt is a trap.  I think the pain is worth undergoing to forego the risk of borrowed money.

Government needs you to pay taxes's picture

That's the US Sec of State threatening US banks if they buy a particular bond.  Let that sink in for a moment.  

geno-econ's picture

Jack Lew, where are Yew ? Kerry is playing on your turf.   

Librarian's picture

This is worse than the 2011 direct attacks against S&P after their downgrade of the US?

I fail to see the point in public threats through the media at this point.  The same could have been accomplished at the next secret biweekly meeting at the Fed.  My guess is that it's already a done deal.  This is just a bit of remedial face saving for future political use.

CuttingEdge's picture

It's interesting comparing the players in the Roman Empire with the US one.

Obama for Nero, maybe? Fiddling (with his putter) while the US goes down the tubes. Or maybe Caligula is more apt - he already has a horse in the Senate, so he has that base covered...

Manthong's picture

keep in mind.. they were all inbred..

and the aquaducts were sealed with lead

SteveNYC's picture

Don't get too angry. The more Washington attempts to use the USD$ and the US capital markets as a weapon, the quicker other countries will leave both and pursue alternate options. The days of the $ and US capital being a weapon are quickly drawing to a close, hastened by the morons in DC.

Rodders75's picture

Too right. Get gun. Aim at foot. Shoot.

ack's picture

Shit. USG is worried "sidelined US money" will stampede banks to buy Russian bonds. It'll be crazy-wild. Where's the fucking queue? I'm in.  

JRobby's picture

John Kerry is part of the wholly owned corporation of shitbag, yes-men stooges so..........?

Whoa Dammit's picture

I don't know which is funnier, Kerry saying banks could risk their reputation, or someone who has no reputation left to risk (Kerry) lecturing others about their reputations.

detached.amusement's picture

I had a good laugh at the usage of "banks" and "reputation" in the same sentence

joseJimenez's picture

 

A bit of an oxymoron, isn't it.

rccalhoun's picture

its beyond an oxymoron....a new word needs be invented    but kerrymoron is an oxymoron, also

 

DaveyJones's picture

the bank is the ox
Kerry is the moron

geno-econ's picture

Lavrov should warn the world of the dangers in consuming Heinz Ketchup.

Kirk2NCC1701's picture

Sec. Kerry, if they back the Bond profits in GOLD, they're "Off to the races".

What say you?  Neigh?

p.s. NO danger of Russian interest rates going to ZIRP or NIRP any time soon, right?  So, bullish for Bonds?

open-range's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.wallstreet34.com

Sandmann's picture

yes but you work for Federal Government

Nutsack's picture

Isn't swallowing 8 gallons of man-chowder a day an STD risk?

Yen Cross's picture

   Open-Range? Is that what they call Swedish goat orgies now?

 I think sometimes, Tyler intentionally lets a spammer slip in, just to read the snarky comments ;-)

Donald J. Trump's picture

Who the fuck listens to John Kerry!

Rodders75's picture

William, I think that's very funny but excuse my limey ignorance, apart from Horse Face himself who is that a reference to?

Freddie's picture

Hmm...not William's usual Frankenstein reference. Very creepy.

For those in the UK and othe rparts of the world or who are too young - here is the source of the Mr. Ed reference.

https://www.youtube.com/watch?v=qGdxxMECZz4

Noe that is a young Clint Eastwood on this episode. Both his western and Mr. Ed were on the CBS TV network. I loved Mr. Ed.  Far more entertaining than horseface Kerry-Kohn douchebag.

Clint's love interest on the phone appears to be Donna Dixon aka Ellie Mae from the Beverly Hillbillies.  The star of Mr. Ed was a Scotsman.

 

Baby Bladeface's picture

Kerry is unique humanoid specimen, being a goat's ass with horse face.

Perhaps is created South Park genetics engineer Mephesto?

Freddie's picture

Go watch or rewatch Ridley Scott's Blade Runner (based on a Phillip Dick novel).  

Kerry was an error "skin job" done by the Tyrell Corporation.  He was supposed to be terminated at the factory but this creepy humanoid escaped. 

Yen Cross's picture

  I'd rather wake up with a severed horse head next to me. lol

Kina's picture

China says, sell US buy Russian.

Much better deal.

Hongcha's picture

Moscow is testing the waters with a small amount.  Here is where the rubber meets the road - will the banks go through the motions of pretending Kohn can intimidate them?  We will see who runs Bartertown.  My guess is, the US banks will refuse to underwrite - amid patriotic fanfare - and then backdoor it.  It's a FARCE, remember.  Not a drama.

Bro of the Sorrowful Figure's picture

good point, additionally maybe vlad is expecting the dollar to reverse course strongly against the ruble. would be a nice little fuck you if oil came back and the ruble jumped while the dollar's last leg is kicked out from under it.