Financial companies in Kazakhstan have begun buying Russian bonds at significant discounts from foreign investors who cannot dispose of Russian assets due to sanctions imposed after the invasion of Ukraine, sources close to the file told Bloomberg, Agerpres reports.

According to these sources, in recent months, brokerage firms and banks in Kazakhstan have started buying or making offers to buy Russian bonds. Registering the bonds with a clearing house in Kazakhstan will later allow buyers to receive a coupon and principal payment.

This workaround allows Kazakh companies to make quick profits for themselves and their clients at a time when there are international investors stuck with billions of dollars in Russian bonds. Several restrictions prevent foreigners from receiving coupon and principal, but inside Russia local investors can still pay for bonds in rubles.

The Central Depository and the Financial Regulatory Authority of Kazakhstan did not want to answer questions, but in the last eight months of this year, the volume of Eurobonds and government securities issued by the Ministry of Finance of Russia, registered in the Central Depository in Alma-Ata, increased by 100 times.

Kazakh investors can still work in the ruble bond market as their country has maintained financial and trade ties with Russia. In contrast, many foreign investors in ruble-denominated Russian sovereign bonds now have assets on which they can no longer earn interest outside of Russia. By selling these bonds, foreign investors can recoup at least part of the investment value.

In late June, Russia defaulted on its foreign debt due to international sanctions that block payment channels to external creditors. However, Moscow still has money and is ready to pay those bondholders who are not isolated from the Russian currency.