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Russia wins conclusively the Battle of the Eurobond

Russian Prime Minister Dmitry Medvedev attends a United Russia party congress in Moscow, Russia, February 6, 2016. REUTERS/Dmitry Astakhov/Sputnik/Pool ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS.

On 27th May 2016 I wrote an article for The Duran taking vigorous issue with the stories being spread in the Western media that Russia’s Eurobond issue was a failure.  I pointed out that a Eurobond issue that was three times over-subscribed could not by any stretch be called a failure, especially when carried out against a backdrop of Western sanctions and an orchestrated campaign by Western governments to sabotage the issue.

I also said that one part of the campaign by Western governments to sabotage the issue – the attempt to engineer a denial of clearing services by the two big Western depositories, Euroclear and Clearview – was unsustainable given the legality of the issue, and that any attempt to persist with the denial of such services would expose Euroclear and Clearview to legal action which they would find impossible to defend. I predicted that in light of this it was only a matter of time before Euroclear and Clearview reversed themselves and agreed to provide depository services for the Eurobond.

Here is what I said:

“As for the attempts to block Russia using the clearing services provided by Euroclear and Clearview, these are legally speaking so dubious – given that what is involved are trades in perfectly legal bonds – that if Euroclear and Clearview persist with them they are likely to face legal challenges.   The Russians have confirmed they are in talks with Euroclear and they are almost certainly in discussion with Clearview as well.  No doubt their lawyers – the British law firm Linklaters & Alliance – will be explaining to Euroclear and Clearview during those talks that the Russians are reserving all their legal options and that none have been ruled out.  Given that the attempt to sabotage the sale of the bonds has been a failure there is little point any longer in denying them clearing services.  Probably Euroclear and Clearview have already come round to this view and the probability is they will quietly agree to provide the bonds with the usual clearing services shortly.”

So it has proved.  Euroclear has now confirmed that it has now agreed to provide depository services for the Eurobond – just as I predicted it would.  The news caused yields on the Eurobond to fall to 4.12% as against the 4.75% as of the date of issue.  The yields have in fact been slowly falling ever since the issue took place back in May.

With Euroclear’s agreement to provide the issue with depository services it is only a matter of time before Clearview agrees to do the same.  This represents the final collapse of Western efforts to sabotage the issue.  Russia is now free to issue Eurobonds as it pleases, and there is nothing short of declaring war on Russia that the Western powers can do about it.

Before leaving the subject of the Eurobond I should say that I heard a long explanation concerning the reasons behind its issue from Anton Siluanov, Russia’s Finance Minister, at the St. Petersburg International Economic Forum, which I attended a few weeks ago in June.  Siluanov made the same points that I made in my articlethat the whole point of the issue was not so much to raise money but to demonstrate Russia’s ability to issue bonds and to carry out all the necessary work involved in their issue by itself.  He confirmed what I predicted in the article that following the success of the issue all future Russian Eurobond placements would be exclusively managed by Russian banks.

Not only has the Western attempt to sabotage the Russian Eurobond issue been a total failure.  It has ended up strengthening Russia’s ability to undertake such issues by itself, just as I said it would.  As I predicted the result of the Western campaign to sabotage the issue is that Russia is now more financially independent of the West than it was previously, and is therefore stronger.

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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.

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