© Reuters. FILE PHOTO: British Foreign Secretary Liz Truss attends a news conference following talks with Ukrainian Foreign Minister Dmytro Kuleba in Kyiv, Ukraine, February 17, 2022. Efrem Lukatsky/Pool via REUTERS
By William James and Guy Faulconbridge
LONDON (Reuters) – Britain will stop Russia selling sovereign debt in London after President Vladimir Putin deployed military forces into two breakaway regions of eastern Ukraine, Foreign Secretary Liz Truss said on Wednesday.
The move is in line with other incremental steps Western countries have taken this week to punish Russia for its actions in Ukraine, stopping short of comprehensive sanctions threatened in case of a large-scale assault. On Tuesday, Britain added to its sanctions list five small Russian banks and three Russian billionaires already sanctioned by the United States.
“We’ve been very clear that we’re going to limit Russian access to British markets,” Truss told Sky. “We’re going to stop the Russian government with raising sovereign debt in the United Kingdom.”
Truss said there would be “even more tough sanctions on key oligarchs, on key organisations in Russia, limiting Russia’s access to the financial markets, if there is a full scale invasion of Ukraine”.
To limit sovereign debt sales in London, Britain would need additional legislation, according to Western officials. Clearing transactions would also be affected.
With the world’s fourth largest foreign exchange reserves, of over $630 billion, and Brent crude at nearly $97 a barrel, Russia is unlikely to need to sell large amounts of foreign-denominated debt in the near future.
Truss did not discuss whether Britain would also stop the trade in sovereign debt that has already been issued.
The U.S. government broadened restrictions on trading of Russian government debt on Tuesday, prohibiting participation in the secondary market for bonds issued after March 1.
U.S. investors have been banned from buying new dollar-denominated Russian debt since 2014, when Russia annexed Crimea. U.S. banks have also been barred from taking part in the primary market for non-rouble sovereign bonds since 2019.
Putin on Monday recognised two Russian-backed regions in Ukraine after an address in which described modern Ukraine as an artificial construct that threatens Russian security.
Western intelligence agencies are trying to work out if Putin’s plan is merely to formalise control over the two rebel regions or launch a much larger assault on Ukraine.
Truss said it was highly likely Putin’s plans involved a move on Ukrainian capital Kyiv. She said it was not clear yet whether Russian troops had entered the Russian-backed regions.
“We do not have verified evidence that that has taken place yet,” Truss told LBC radio. “The situation is currently ambiguous.”
Russia denies it plans to invade Ukraine and says the West is gripped by anti-Russian hysteria.
Truss said she thought Britain’s media regulator, known as Ofcom, would be looking at Russia’s state-backed news channel RT which broadcasts in Britain.
“On the subject of Russia Today, I am of the view that it broadcasts propaganda and fake news on a regular basis and is effectively an arm of the Russian state, and I’m sure Ofcom is looking at that,” Truss told Times Radio.
RT did not immediately respond to a request for comment. The media regulator did not immediately comment.
UK to stop Russia selling sovereign debt in London