Russia may replace Eurobonds with domestic debt

MOSCOW: Russia could raise debt domestically if it is not able to sell Eurobonds to foreign investors, news agencies quoted Finance Minister Anton Siluanov as saying on Saturday.

Russia has pencilled in up to $3 billion in foreign borrowing in its 2016 budget, which would be the country's first tapping of foreign debt markets since sanctions were imposed on Moscow two years ago over the Ukraine crisis. 

But most of the 25 foreign banks invited to participate in arranging the Eurobonds have refused, warned by the United States and the European Union that proceeds from the issues could be used to finance sanctions-hit Russian entities.

"We wanted to test the market, participate in the market, so investors could see our presence," Interfax news agency quoted Siluanov as saying.

"Yes, there is some intrigue about the issue now, many banks have refused. However, we are not closing this window of possibility."

Siluanov added that if Russia sold foreign debt this year, it would be issued either in dollars or in euros and the sale would happen only if the "quality of investors" was the same as in Russia's previous bonds placements. 

Russia raised $6 billion and 750 million euros via Eurobonds in 2013, its last tapping of foreign debt markets, before annexing the Crimea region from Ukraine in early 2014.

Siluanov said there was no budgetary need to enter foreign markets again, as its current balance of payments was in a good position.

"Additional capital inflow from the Eurobonds will only add to the rouble's strengthening. Do we really need that? I don't believe that is especially needed," Siluanov was quoted as saying.

But the ministry needs funds to help fill a budget deficit, envisaged at 3 percent of gross domestic product this year.

Siluanov said foreign debt could be replaced with borrowing on the domestic market, by issuing treasury bonds.

"We are more than able to (raise the debt domestically)," he reportedly said. - Reuters