© Reuters. The Amundi company logo is seen at their headquarters in Paris

LONDON (Reuters) – Amundi is cautious on Russian bonds over environmental, social and governance (ESG) issues but does not expect the country’s debt to be targeted with further sanctions from Washington for now, said Ray Jian, head of emerging market aggregate debt.

“We expect more sanctions on Russia, but we don’t think there will be market relevant sanctions at this stage,” said Jian, adding he expected new curbs over the poisoning of opposition politician Alexei Navalny or the SolarWinds hacking scandal to be targeted at individuals.

Sovereign dollar-bonds issued by the Russian government have been under sanctions since introduction of a ban for U.S. financial institutions to participate in primary issuance over the 2018 poisoning of former spy Sergei Skripal in Britain though there have been no limitations to secondary trading.

Earlier in March, the United States imposed sanctions on seven senior Russian officials and 14 entities over Navalny in President Joe Biden’s most direct challenge yet to the Kremlin.

“The next move on sovereign debt would have to be on OFZ, and if there were a move to happen – which is not our base case – we think it would be similar to the current Eurobond sanction,” said Jian at Amundi, Europe’s largest asset manager with more than 1.4 trillion euros ($1.67 trillion) under management.

With Russia not rating very high on its internal ESG rating scale, exposure to its debt would force Amundi to shift exposure elsewhere to achieve its aim of having a higher ESG rating compared to its respective benchmarks, said Jian.

($1 = 0.8379 euros)

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