Soviets Look Into Offering Bond Issue in U.S. Markets
The Soviet Union, warming up to Wall Street, is considering a bond offering in American financial markets once longstanding debts to the U.S. government incurred by pre-1917 czarist regimes are settled, bankers said Wednesday.
“Something has been talked around,” a top New York banker said in an interview. “If the czarist bonds are settled, they’d be free and clear.”
The Center for Security Policy, a conservative Washington think tank, said that several big U.S. banks were recently invited to lead the underwriting of a $250-million Soviet bond issue and that Citibank had accepted the offer.
Oleg Enoukov, senior manager at the New York office of the Soviet Bank for Foreign Economic Affairs, denied that an offer had been made but said once the pre-revolution claims are cleared, “in the future, it may make this (bond issue) possible.”
The Soviet bank office was established last summer to seek new business opportunities, Enoukov said. “We’re just exploring new possibilities of doing business with American banks and financial institutions,” he added.
A spokeswoman for Citibank denied that the bank had already accepted a Soviet offer. “Any discussions at this point are at an extremely early stage,” she said.
Moscow’s interest in borrowing in the United States coincides with a crisis in the Soviet Union as President Mikhail S. Gorbachev struggles to institute economic reforms, a subject likely to be on the agenda when he meets President Bush aboard ships in the Mediterranean next month.
Before the Soviets can borrow here, they have to meet the terms of the 1934 Johnson Debt Default Act, which bars credit to countries in default to the U.S. government.
“Their ability to float bonds in the United States would be dependent on their getting off the Johnson Act,” one State Department official said.
The United States lent some $192.6 million to Alexander Kerensky, who was prime minister in a provisional government in 1917 before being overthrown by the Bolshevik Revolution.
The Soviet Union has since refused to honor the debt, but last year it began settlement negotiations with Washington.
The Soviet Union gained re-entry to the London bond market after reaching a similar settlement with Britain two years ago.
