Aurelia Butler

WASHINGTON (Reuters) – The United States and its allies will target Russian banks and officials with a “sweeping package” of sanctions on Wednesday and ban new investment in Russia, the White House said, after Washington and Kyiv accused Moscow of committing war crimes in Ukraine.The new sanctions will impose additional restrictions on financial institutions and state-owned enterprises in Russia and target Russian government officials and their families, White House press secretary Jen Psaki said on Tuesday.”Tomorrow, what we’re going to announce … in coordination with the G7 and EU, (is) an additional sweeping package of sanctions measures that will impose costs on Russia and send it further down the road of economic, financial and technological isolation,” Psaki said, noting that the G7 and EU comprised around 50% of the global economy.The measures will “degrade key instruments of Russian state power, impose acute and immediate economic harm on Russia, and hold accountable the Russian kleptocracy that funds and supports (Russian President Vladimir) Putin’s war,” she said.She declined to comment on reports that the sanctions would target the daughters of Putin.The U.S. Justice Department on Wednesday also planned to announce new enforcement actions to disrupt and prosecute criminal Russian activity. Grim images emerging from the Ukrainian city of Bucha include a mass grave and bodies of people shot at close range, prompting calls for tougher action against Moscow and an international investigation.U.S. Secretary of State Antony Blinken said the killings were part of a deliberate Russian campaign to commit atrocities. Russia, which says it launched a “special military operation” in Ukraine on Feb. 24, denies targeting civilians and said images of the deaths were a “monstrous forgery” staged by the West. Neither provided evidence to support the assertions. A senior French official said the European Union would also likely impose new sanctions on Wednesday. The Wall Street Journal reported that Sberbank may be among the banks targeted.Two European diplomats said the final package of sanctions would be announced in a coordinated fashion on Wednesday. More

LONDON (Reuters) -Russia edged closer to a potential default on its international debt on Wednesday as it paid dollar bondholders in roubles and said it would continue to do so as long as its foreign exchange reserves are blocked by sanctions.The United States on Monday stopped Russia from paying holders of its sovereign debt more than $600 million from reserves held at U.S. banks, saying Moscow had to choose between draining its dollar reserves and default.Russia has not defaulted on its external debt since reneging on payments due after the 1917 Bolshevik Revolution.”This speeds up the timeline around when Russia runs out of space on willingness and ability to pay,” one fund manager holding one of the bonds due for payment on Monday said.The Kremlin said it would continue to pay its dues.”Russia has all necessary resources to service its debts… If this blockade continues and payments aimed for servicing debts are blocked, it (future payment) could be made in roubles,” Kremlin spokesman Dmitry Peskov said. With a total of 15 international bonds with a face value of around $40 billion outstanding, Moscow has managed to make a number of foreign exchange coupon payments on its Eurobonds before the United States stopped such transactions. Russia’s finance ministry said on Wednesday it had to pay roubles to holders of its dollar-denominated Eurobonds maturing in 2022 and 2042 as a foreign bank had refused to process an order to pay $649 million to holders of its sovereign debt.The finance ministry said the foreign bank, which it did not name, rejected Russia’s order to pay coupons on the two bonds and also did not process payment of a Eurobond maturing in 2022.Russia’s ability to fulfil its debt obligations is in focus after sweeping sanctions in response to what Moscow calls “a special military operation” in Ukraine have frozen nearly half of its reserves and limited access to global payment systems.’ARTIFICIAL SITUATION’JP Morgan, which had been processing payments on Russian sovereign bonds as a correspondent bank, was stopped by the U.S. Treasury from doing for the two payments due on Monday, a source familiar with the situation said. JP Morgan declined to comment. Russia may consider allowing foreign holders of its 2022 and 2042 Eurobonds to convert rouble payments into foreign currencies once access to its forex accounts is restored, the finance ministry said.Until then, a rouble equivalent of Eurobond payments aimed at bondholders from so-called unfriendly nations will be kept in special ‘C’ type accounts at Russia’s National Settlement Depository, the ministry added. Russia has a 30-day grace period to make the dollar payment, but if the cash does not show up in bondholders account within that time frame it would constitute a default, global rating agencies have said. Russia dismissed this as being a default situation. “In theory, a default situation could be created but this would be a purely artificial situation,” Peskov said. “There are no grounds for a real default.” Bondholders had been tracking bond payments since sweeping sanctions and counter measures from Moscow which have severed Russia from the global financial system. Russia on Wednesday paid coupons on four OFZ treasury rouble bonds. These were once popular for their high yields among foreign investors, who are now blocked from receiving payments as a result of sanctions and Russian retaliation. More

Brussels is proposing to levy punitive trade tariffs on countries that do not accept the return of citizens who have illegally entered Europe, as the bloc steps up efforts to toughen its migration policy.The move by the European Commission is its latest response to a populist surge driven by anti-immigrant rhetoric. France’s president Emmanuel Macron faces a tough re-election battle against the far-right Marine Le Pen in this month’s elections, while immigration hardliner Viktor Orban won a crushing poll victory in Hungary at the weekend.The EU grants tariff free access to imports from almost 70 developing countries to boost their economies. But in a review of the scheme the Commission has proposed revoking this privilege, known as the General System of Preferences (GSP), from countries that refuse to accept citizens deported by the EU.Brussels claims it had to act because the “brain drain” of migrants to the EU damages their home countries. But some members of the European parliament condemned the proposal which will hit developing countries’ economies by making their exports more expensive.Speaking to the Financial Times on Tuesday, the Commission said: “Orderly international migration can bring important benefits to the countries of origin and destination of migrants and contribute to their sustainable development needs. Increasing coherence between trade, development and migration policies is key to ensure that the benefits of migration accrue mutually to both the origin and destination countries.”Heidi Hautala, the MEP in charge of steering the legislation through the parliament, said that the commission should remove the migration link from the proposal, which has to be agreed by all 27 member states.“It is toxic,” she said. “It detracts from the GSP which is supposed to eliminate poverty and promote sustainable development for 2bn people on this earth.” Trade should not be a weapon in combating migration, she added.The Finnish Green party MEP said parliament’s trade committee would vote on April 25 on amendments that emphasised co-operation in managing migration.Of the 396,000 immigrants told to leave Europe in 2020, just 70,000 returned to their home countries, although the process was hindered by Covid lockdowns. Even in 2019, before the pandemic, only 29 per cent of illegal immigrants told to leave the EU returned home.Mali, Senegal and Guinea were among countries with the lowest return rates and are therefore most likely to lose trade privileges if the European parliament and member states approve the Commission plan. The proposed tariffs include 12 per cent on cotton shirts and 24 per cent on tinned tuna.GSP beneficiaries must agree to abide by certain international treaties on labour rights and human rights or lose the status. Almost 50 of the poorest countries benefit from the Everything But Arms scheme, which exempts all goods except weapons and ammunition.Another 19 low and lower-middle income countries are granted a partial or full removal of customs duties on two-thirds of tariff lines. The EU is removing some goods from Cambodia from GSP because of human rights abuses. More

Equities largely lost ground at the market open on reports that the United States and its allies had prepared new sanctions on Moscow that will target Russian banks and officials and ban new investment in Russia.An EU official said the European Union will also have to introduce measures against imports of Russian oil and even gas at some point as a way to pressure Moscow.The dollar-denominated RTS index fell to 979.34 points before paring losses and adding 2.6% on the day to 1,031.3 points by 1219 GMT.The rouble-based MOEX Russian index gained 0.5% to 2,675.5, still trading far from an all-time high of 4,292.68 reached in October.Downside pressure on shares emanating from negative sentiment around news on Western sanctions could be limited as the government has promised to support Russian companies by buying their stocks with money channelled from the rainy-day National Wealth Fund.The Russian stock market is showing “miraculous resilience” to possible new sanctions and a rapid drop in activity in the domestic manufacturing and services sectors in the absence of foreign investors that are still barred from taking part in trading in Russia, Finam brokerage said in a note.Shares in oil producer Lukoil climbed 2.8%, outperforming the broader market. Its peer Gazprom (MCX:GAZP) Neft added 1.9%.Banks were in the red, with the two major state-owned lenders Sberbank and VTB losing 1.8% and 2.4%, respectively.The Russian rouble firmed, shrugging off a potential default on Russia’s international debt as the country paid dollar bondholders in roubles and said it would continue to do so as long as its foreign exchange reserves are blocked by sanctions.The rouble added nearly 2% on the day to 81.70 to the dollar. It strengthened 2.7% to trade at 89.10 versus the euro, near levels seen before Russia sent tens of thousands of troops into Ukraine on Feb. 24.Weekly inflation data will be in focus later in the day. If inflation shows signs of slowing, it may raise chances of a rate cut by the central bank at its next board meeting in late April. The latter could be positive for OFZ treasury bonds. “At the same time, geopolitical risks and rouble volatility limit the probability of this scenario,” Promsvyazbank said in a note.For Russian equities guide seeFor Russian treasury bonds see More

LONDON (Reuters) – Asset managers Blackrock (NYSE:BLK) Inc. and Ashmore Group Plc. are among the top holders of Sri Lanka’s international bonds that form part of a creditor group as markets prepare for a potential debt restructuring, a source said on Wednesday.The bondholder group, which hasn’t been formally announced yet, holds more than 30% of country’s foreign sovereign bonds, the source familiar with the situation told Reuters.While members so far are mainly real money investors, the group is set to expand and include both hedge funds and secondary market funds in the near future, the source added. BlackRock and Ashmore did not immediately respond to a request for comment. A debt restructuring would be the first for the island nation, facing its worst economic crisis in decades. The country’s foreign exchange reserves stand at $2.3 billion, with a $1 billion dollar bond maturing on July 25. The country holds around $12 billion of outstanding international debt. The country has struggled to pay for critical imports including fuel, food and medicines. Sri Lanka announced last month it would seek help from the International Monetary Fund (IMF) to help it solve its worst financial crisis in years. Rating agency Moody’s (NYSE:MCO) said on Wednesday that the extended period of political uncertainty could delay ongoing discussions to secure other external financing.President Gotabaya Rajapaksa, who is governing the country since 2019 with other family members in top positions, will not resign despite demonstrations and street protests, a government minister said on Wednesday. Rajapaksa revoked a state of emergency late on Tuesday after dozens of lawmakers walked out of the ruling coalition, leaving his government in a minority in parliament.Sri Lanka’s sovereign dollar bonds dropped more than 3 cents in the dollar. The 2027 bond slipped 3.44 cents to trade at deeply distressed levels of less than 40 cents in the dollar, according to Tradeweb data. More

SHANGHAI (Reuters) – China’s top European business group warned on Wednesday that its “zero-COVID” strategy was harming the attractiveness of Shanghai as a financial hub, echoing analysts voicing caution over the mounting economic toll of the country’s coronavirus curbs. China has for the past month been tackling multiple outbreaks with an elimination strategy that seeks to test, trace and centrally quarantine all positive COVID-19 cases.Nomura estimated on Tuesday that a total of 23 Chinese cities have implemented either full or partial lockdowns, which collectively are home to an estimated 193 million people and contribute to 22% of China’s GDP.The European Union Chamber of Commerce in China said that the strategy was causing growing difficulties transporting goods across provinces and through ports, harming factory output.Chamber President Joerg Wuttke told a media roundtable that this would likely impact China’s ability to export, which could eventually stoke inflation. “In China, COVID is still associated as if it were the plague. I think there needs a bit more education from the Chinese authorities, to take the fear away in order to make people more comfortable to live with this kind of uncertainty,” he said on Wednesday.TRAVEL RESTRICTIONSChina, which has severely restricted international travel for the last two years, shows little inclination to ease up on its approach for now. On Wednesday, Wu Zunyou, chief epidemiologist at the Chinese Center For Disease Control and Prevention, said that the epidemic situation would improve soon if China strictly implements existing COVID measures.A handful of economists have lowered growth forecasts for the first half of 2022, as the COVID surge, coming amid persistent property weakness and global uncertainties, makes it harder for China to hit its full-year target of around 5.5%.Shanghai-based Bank of Communications cut its forecast for China’s first-quarter GDP growth from 5% to 4%, with the drop coming solely from slowing activity in March, said senior economist Tang Jianwei. Shanghai has put strict movement curbs on its 26 million residents, barring them from even leaving their front doors other than for COVID tests.Dan Wang, chief economist at the Hang Seng Bank China in Shanghai, said the primary ripple effect for now from the city’s lockdown was in the financial and legal services sector.For example, companies looking to go public typically have to work in person with legal teams based in Shanghai – but current travel restrictions make that impossible.”Macro confidence will collapse if this lockdown continues like this, and it will be reflected in the stock market,” she said. “I expect monetary easing happening pretty soon in the second quarter.” More