Treasury Department bans US investors from buying Russian bonds
New sanctions guidelines: Russian corporate or government bonds may only be sold to foreign buyers
Ibrahim Al-TarikMay 8, 2025
The US Treasury has decided to ban US investors from buying Russian debt in the secondary markets. This represents an apparent extension of the previous policy, which only banned the purchase of newly issued Russian government bonds and some Russian corporate bonds.
The Treasury Department's new guidance states that US persons will continue to be banned from making new investments in Russia, which now includes the acquisition of new and existing debt and stock issued by a company in the Russian Federation. Investors can continue to sell or transfer securities as long as they do so to a non-US counterparty, according to the Treasury Department, and they can also continue to hold the debt already issued.
"Consistent with our goal of depriving Russia of the financial resources it needs to continue its brutal war on Ukraine, the Treasury Department has clarified that U.S. persons are barred from making new investments in Russia's success, too through purchases in the secondary market," said a Treasury Department spokesman.
Buying of Russian corporate bonds in the secondary market in the US and Europe was already restricted due to the sanctions against financial institutions such as Sberbank and VTB Bank and the reputational costs associated with supporting companies based in the country. Still, some opportunistic buyers have bought Russian corporate debt at a discount, betting that the bonds will recover when the war between Russia and Ukraine comes to an end.
Since the beginning of the war in Ukraine, the US has sought to restrict Russia's access to foreign credit markets. Last month, the Treasury Ministry urged Russia to default on its government bonds, leaving the country unable to make payments on its dollar-denominated debt through US financial institutions.
The Treasury Department's new guidance appears to be a broader interpretation of existing sanctions, already imposed on Russia in April to halt new capital inflows into Russia following the invasion of Ukraine. The expansion of sanctions will likely force US investors to sell Russian-related debt or write it off as worthless.
"The Treasury Department's statements to date have made it clear that they are attempting to prevent new funds from flowing into Russia," said Dennis Hranitzky, head of sovereign litigation at Quinn Emanuel Urquhart & Sullivan. "This is something completely different."
Dollar-denominated Russian government bond prices traded between 15 and 25 cents on the dollar on Tuesday, about 5 cents lower than on Monday. Bonds from Russian state-owned gas giant Gazprom were also down about 5 cents from Monday's value, trading between 25 and 30 cents per dollar on Tuesday.
It is not the first time that the US has banned American investors from buying a country's debt from other trading houses. Earlier, the Ministry of Finance had banned the purchase of Venezuelan government bonds on secondary markets. The new policy on Russia is broader and also includes corporate bonds issued for business projects or activities in Russia.
While foreign investors managing portfolios in emerging markets held Russian debt before the war, Russia was only a small part of the global bond universe. Russian government bonds made up about 6% of a JPMorgan local currency emerging market bond index and 2.7% of a dollar bond index. Investors typically use such indices as a barometer of how much they should think of a particular asset. In March, JPMorgan removed Russian government and corporate bonds from all of its mainstream fixed income indexes.
According to the Ministry of Finance, investors can still buy shares in diversified funds that hold Russian debt.
Many Russian companies have tapped into the international bond markets through debtors and special purpose vehicles based in countries such as Ireland, Luxembourg or the Netherlands. The trading ban now also applies to debt securities issued by companies that have significant operations or domicile in Russia, leaving lawyers and investors with no clear answers as to how trading in many debt securities from these foreign issuers might be affected .
