Sanctions are bleeding the market dry
Investors find it difficult to trade Russian assets
Ibrahim Al-TarikOctober 5, 2026
Global investors, with at least $150 billion worth of Russian securities on their books, are desperate for opportunities to do business after Western sanctions locked the country out of the global financial system.
According to the Central Bank of Russia, foreign investors held $20 billion worth of Russian dollar debt and $41 billion ruble-denominated government bonds at the end of 2021. According to data from the Moscow Stock Exchange, holdings of Russian stocks amounted to USD 86 billion.
However, the exclusion of many Russian banks from the Swift payments network means foreign investors are now stuck, unable to figure out how to exit without violating the new sanctions and unable to find business partners who are willing and able are to buy.
"Markets have consistently priced in extremely conservative levels because, frankly, they've pulled out and said, 'We'll wait and see what happens,'" said Rick Rieder, chief investment officer of global fixed income at BlackRock, one of the largest western holders of Russian government bonds, according to data from Bloomberg. "There's not really much trading going on. Nobody wants to be on the other side."
Over the weekend, Western countries said they would block some Russian banks from accessing Swift, the messaging network that powers global payments, while blocking the central bank's access to $630 billion in foreign exchange reserves. Starting Tuesday, the US will ban its financial institutions from buying new Russian government bonds.
Trading has largely ceased. The Central Bank of Russia on Monday banned foreign institutions from selling local securities on the Moscow Stock Exchange and suspended trading in stocks and derivatives on the exchange all day.
Meanwhile, foreign stock exchanges suspended trading in the stocks of Russia's most prominent companies. Deutsche Boerse, Germany's largest stock exchange operator, suspended trading in shares of 16 Russian companies including Aeroflot, Rosneft, Sberbank, VTB and VEB Finance.
The value of London-listed securities including Sberbank, TCS and Gazprom collapsed on Monday, but many traders also voluntarily withdrew from pricing fearing the consequences, instead awaiting further guidance from their compliance departments.
Nasdaq and the New York Stock Exchange have temporarily suspended trading in some Russian listed companies as they seek more information on the impact of sanctions following Russia's invasion of Ukraine.
The US regulations give exchanges the power to suspend trading in shares and ensure investors are fully informed of any material information that could affect share prices. Companies suspended by Nasdaq include Nexters, Yandex and Ozon Holdings.
One question for brokers and investors was whether their trading partners would be locked out of Swift. "I have to stop trading with Russia until I get a list," said a trader at an investment bank.
To highlight these concerns, the London Stock Exchange said shares in VTB - a US-sanctioned bank - can still be traded. Still, the LSE warned its members to conduct their own due diligence and "take appropriate steps to ensure they comply with any applicable sanctions, whether present or future."
The LSE will suspend trading in VTB from May 25, when an exemption from US sanctions on holdings in select Russian banks expires, provided the sanctions are still in effect.
Some brokers were concerned that even if they did succeed in closing a deal, there was little guarantee that it would be settled and the asset exchanged for cash. Most cross-border transactions are conducted in US dollars and banks are responsible for managing the currency risk involved in such transactions. "It's just so messy. If you make a deal and you can't settle it, you're left with the risk," said a trader at a US brokerage.
These concerns have been compounded by fears that payments for deals and coupons on bonds could be frozen in accounts with custodians or international securities depositories, where deals are settled and balances between central banks and commercial banks are updated.
The two largest custodians, Belgian companies Euroclear and Clearstream, together hold around EUR 50 billion in assets for investors from all over the world, making them a pillar of the financial system. Transactions are typically settled by transferring funds between client accounts with the custodian or between the two market service providers.
Late on Monday evening, Clearstream announced that the ruble is no longer eligible as a settlement currency, effective immediately.
Euroclear said it will shut down VTB, the main channel between Euroclear's two customers and Clearstream, on Tuesday and will stop doing ruble-denominated transactions outside Russia from March 3. She also said she could not accept incoming funds from her other correspondent bank, Dutch group ING. In correspondent banking, one bank provides services to another, often in a different country.
Some brokers pinned their hopes on Euroclear finding a new compliant bank in Russia. However, such a process can take time.
"Establishing a new correspondent banking relationship can take months. It is a very tedious process. You will typically be asked to conduct on-site visits for due diligence or to explain why you have not done so," said Virginie O 'Shea, Founder of Firebrand Research, a capital markets consulting firm.
Carsten Brzeski, ING's global head of macro, said Russia could counter freezes on bank balances by Western powers by imposing a moratorium on corporate debt repayments. On Monday, Vladimir Putin banned Russians from transferring foreign currency abroad, hampering banks' repayment of foreign liabilities.
BlackRock believes Russia may default on its bonds due to its inability to make payments to investors' accounts. "It's the difference between being able to pay and being willing to pay," said Rieder.
