The letters were sent by the Professional Union of Belarusians in Britain (PUBB), an association that includes many professionals working for financial institutions and law firms.

PUBB argues that banks, which acted as joint lead managers and bookrunners on the bond, and Barclays, which facilitates secondary market trading, have failed to comply with their Code of Ethics and Environmental, Social and Corporate Governance (ESG) policies as well as the Financial Conduct Authority (FCA) regulations.

The joint lead managers have been asked to donate proceeds received from the bond issuance to charity organisations and to “take appropriate disciplinary or contractual measures with respect to the relevant employees or consultants involved in the Bond Issue due to the breaches of […] Code of Ethics.”

Those banks are regulated entities which publicly adhere to international ESG principles as well the FCA’s principle to act with integrity, said Liudmila D'Cruz, a member of PUBB.

“It is very disappointing that [banks such as] Citigroup, which declared its commitment to respect and protect human rights, is currently assisting a regime blatantly violating those rights in the full view of the international community. The funds, which Citi helps the Belarusian regime to raise, are used directly to finance the repressive machinery,” she added.

PUBB hopes that the banks will respond to the letters and take appropriate measures, otherwise its members are willing to continue to expose their assistance to the current regime in Belarus, D'Cruz continued, adding that a number of steps are being considered, including complaining to ESG rating agencies and to the FCA, depending on the banks’ response. The group's email stated, in part:

Source: the PUBB email to Citigroup

Citigroup declined to comment. Societe Generale, RBI and Barclays did not return requests for comment by the time of publishing.

ESG standards debated

There has been a wide debate in the financial community regarding the ESG regulations.

“ESG standards aren't enforceable, it's a voluntary guidance,” said a lawyer with experience in the debt markets.

"However, if the institution is committed to certain rules, they should comply with them by law. If they don't, then it requires management involvement and internal investigation. I think [the named] banks will conduct an internal investigation based on the letters.”

The lawyer said he thinks the appeal from the Belarusian diaspora might discourage banks from further involvement in any new issuance by Belarus.

Large investment funds are also likely to be discouraged from holding and trading Belarus notes if they are warned that such holdings represent poor ESG standards, said a London-based buysider.

The buysider's fund doesn’t hold Belarus notes but ESG scoring is very important for them. “Say if Brazil, South Africa, Turkey and Russia trade with the same spreads, they would invest into Brazil and South Africa because they score higher in ESG, they are more democratic,” he said.

“Three years ago, funds wouldn't have cared about these issues, but now more and more clients are asking what is in their portfolios, and on this basis there should be a real aversion to holding things like Belarus,” said a second buysider.

The ESG compliance is a very complex issue and funds will have to take ad-hoc decisions on holdings such as Belarus, a third buysider said.

Belarusian expats and UK activists are holding a protest today, 23 September, in Canary Wharf aimed at discouraging international banks from funding the Belarusian regime any further.

The FCA is currently reviewing a complaint requesting the delisting of Belarus sovereign bonds from the London Stock Exchange (LSE).

The LSE listed Belarus's USD 500m 5.875% due February 2026 and USD 750m 6.378% due February 2031 dual-tranche Eurobonds on 25 June. Citigroup, RBI and Societe Generale acted as joint lead managers and joint bookrunners, and Renaissance Capital was joint lead manager on the deal. White & Case LLP and Clifford Chance LLP are named as legal advisors in the prospectus.

Sanctions dilemma

Belarus had been unable to borrow on the international bond markets between 2011 and 2017. Following a human rights campaign, BNP Paribas, Deutsche Bank and Royal Bank of Scotland made a public announcement in 2011 that they would no longer work with the Belarusian government for political reasons.

A fixed income analyst said that, until now, BNP Paribas did not wish to be involved with the country and didn't trade the notes.

A brutal crackdown on the opposition during the 2010 elections had prompted the EU and the US to introduce sanctions against numerous state officials, businesses connected to Belarus leader Aliaksandr Lukashenka and some state-owned enterprises.

The EU however failed to agree sanctions against Belarus officials this week, after Cyprus blocked the measures demanding in return sanctions against Turkey. The approval can still be reached tomorrow at a summit of EU leaders.

Sanctions against individuals might not have much effect on bond trading but economic sanctions will discourage funds from buying into Belarus bonds, agreed the first buysider and the lawyer. “If the EU and the US introduce sanctions, they will have a heavy effect on the holdings, funds will certainly have to freeze them and think about the repayment options at maturity,” the lawyer added.

ABN AMRO Investment Solutions (AAIS), which holds a EUR 10m exposure to Belarus sovereign bonds told Debtwire in an emailed response that if the security is added to the international sanctions list, their delegate mangers will be selling their positions within ten business days.

“As long as a given security is not named on an international sanction list, the delegates follow the strategy described in the prospectus,” the AAIS email said.

Belarus's 5.875% 2026 notes are indicated at 94 mid-price and the 6.378% 2031 notes are at 95 mid-price, according to IHS Markit.

Aliaksandr Lukashenka, who has ruled the country for over 25 years, claimed his sixth election victory on 9 August. Since the elections, which are widely believed to have been rigged, Belarusians have been holding nationwide protests and strikes, and weekly mass gatherings of over 100,000 in the capital, Minsk.

by Alesia Sidliarevich and Laura Gardner Cuesta

Alesia Sidliarevich Associate Editor, CEEMEA Debtwire

Alesia Sidliarevich is an Associate Editor at Debtwire CEEMEA, where she focuses on debt restructuring situations. She has been with Debtwire since 2008, initially joining the publication as a CEE-focused debt capital markets reporter. Alesia has a vast experience in covering bonds and loans primary markets as well as distressed situations and debt restructurings, with articles syndicated in The Financial Times and Forbes. Alesia also worked as a newspaper reporter during her student years in Belarus, a country where she was born and grew up. 

Based in London, Alesia holds two Master's degrees: the MA in History from Central European University and the MA in Journalist from Erasmus Mundus Programme. She is a thrillseeker and enjoys adrenaline driven outdoor sports, such as kitesurfing, rock climbing and lately mountain biking.