Moscow auctioned off its first successful debt sale in more than two months on Sept. 24 after cancelling a string of bond auctions because of the sour investment climate that continues to surround Russia. In 2014, the Russian government skipped a total of 13 previous auctions and voided four more, putting on hold government plans to raise $22.3 billion in bond sales over the course of the year. In the Sept. 24 sale Russia's Finance Ministry managed to sell $262 million in bonds that will mature in 2023. The Finance Ministry did offer the bonds at a greater discount than it typically has in the past, but the result was still considered a successful return to the market by the Russian government.
The auction coincides with Russia's attempts to de-escalate tensions with Ukraine and the West. Kiev, Moscow and the Moscow-backed separatists in Ukraine agreed to a cease-fire that began Sept. 5 and, by the end of the month, the European Union will consider either scaling back or adjusting the sanctions against Russia put in place Sept. 11. Overall, sentiment is shifting within the investment community concerning Russia. Although such feelings are emerging in Europe, the United States, for its part, has not shown any indication it will reconsider its sanctions against Russia.
Many Russian firms, such as natural gas giant Gazprom, were closely watching the auction because they too want to push back into the international market. There are still sanctions against many key Russian firms — Rosneft, for example — preventing long-term borrowing, though these sanctions are the ones under review.
The Kremlin hopes that today's auction is a sign that investment will start to return to Russia. Since the crisis in Ukraine began, foreign investment into Russia in the first three quarters of 2014 has dropped by 50 percent. Gross domestic product growth is expected to be flat for the year, and capital outflows for 2014 are expected to reach $100 billion. The state of the Russian economy is the top concern in the Kremlin, particularly in September as the Cabinet drafts the government's budget for the next few years. There are divisions within the Russian executive branch over how sharp of a decline the economy will suffer should its slide continue. Successful bond sales could well indicate to the Kremlin's Finance Ministry that the decline is tapering.
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