Biden bans US banks from buying or underwriting Russian debt sales

The US government is punishing Russia for its interference in the 2020 US election and cyberattacks by hitting Moscow where it hurts the most: the ruble.

The Treasury Department of Biden administration announced Thursday that starting June 14_ US banks will generally be banned from participating in all bond sales by Russia's central bank_ ministry of finance and sovereign wealth fund. That means these Wall Street firms won't be able to buy or underwrite these crucial transactions by Russia's central government.

The decision marks a significant escalation of US sanctions on Russia and will make it more difficult for Moscow to raise capital. The Russian ruble declined nearly 1% against the US dollar Thursday and the country's stock market retreated modestly.

"This is Biden sending a warning shot. It's a strong statement_" Win Thin_ global head of currency strategy at Brown Brothers Harriman_ told CNN Business.

In August 2019_ the Trump administration prohibited US banks from participating in non-ruble denominated bonds issued by the Russian government and from lending non-ruble funds to Russia. That mostly applied to transactions in US dollars and euros.

The Biden administration is expanding those restrictions by prohibiting US financial institutions from buying ruble-denominated bonds_ too. The Treasury Department also said that US banks will be banned from lending ruble-denominated funds to these entities.

Importantly_ foreign banks that have a presence in the US may be impacted by these sanctions as well_ according to Kevin Petrasic_ head of the bank regulatory practice at Davis Wright Tremaine. Petrasic said the Treasury Department has aggressively asserted its jurisdiction over the dealings of these foreign banks with sanctioned entities.

"The President signed this sweeping new authority to confront Russia's continued and growing malign behavior_" US Treasury Secretary Janet Yellen said in a statement. "Treasury is leveraging this new authority to impose costs on the Russian government for its unacceptable conduct."

The sanctions will "make it harder for Russia to attract foreign capital_ which they need_" said Brown Brothers' Thin.

However_ the Biden administration stepped short of what Thin described as the "nuclear option" against Russia: banning banks from buying already-issued Russian bonds actively trading in the secondary market.