How Goldman Sachs profits from war in Ukraine, loophole in sanctions

Yahoo News

Goldman Sachs, the giant New York investment bank, is cashing in on the war in Ukraine by selling Russian debt to U.S. hedge funds — and using a legal loophole in the Biden administration’s sanctions to do it.

As the Western world scrambles to defend Ukraine by locking down Russian money, the company is acting as a broker between Moscow’s creditors and U.S. investors, pitching clients on the opportunity to take advantage of Russia’s war-crippled economy by buying its debt securities low now and selling them high later, according to four financial world sources familiar with the strategy.

An investor who declined a Goldman trader’s offer to add Russian debt to his hedge fund’s portfolio — because of the war — said the trader suggested he could “just put it in your personal account” to avoid scrutiny.

That does not violate the U.S. sanctions regime, but it is very different from the public face Goldman is putting on its relationship with Russia. In an emailed statement, Goldman is telling the public that it is “winding down” its business in Russia, portraying its actions as supportive of America’s effort to stop Russian President Vladimir Putin.

There is nothing illegal about brokering Russian debt trades. In fact, the Biden administration gave investment firms a green light to trade in Russian assets.

A spokesperson for Goldman Sachs said in an email Thursday: “Winding down our operations in Russia and supporting our clients around the globe in managing and closing out their market obligations are not mutually exclusive. We have robust systems and controls throughout our organization to ensure we are not trading with sanctioned counterparties.”

When U.S. officials sanctioned Russian banks this month, it became illegal for U.S. companies to do business directly with major Russian financial institutions. But the Treasury Department’s Office of Foreign Assets Control, or OFAC, issued a memo affirming the legal legitimacy of trading Russian assets in “secondary markets” — those not directly involving the Russian banks. That’s why Goldman can act as a broker.

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Via https://news.yahoo.com/goldman-sachs-profits-ukraine-war-004757561.html