RUSSIA is limiting corporate access to domestic financing even as the escalating Ukraine crisis increasingly isolates companies from overseas sources of cash.

The government’s about-face on its pledge to end a freeze on pension money being used by private money managers risks raising corporate borrowing costs as it deepens the country’s economic slowdown.

Some of Russia’s biggest issuers are already locked out of international capital markets as punishment for what US and European leaders say is President Vladimir Putin’s support of separatists in eastern Ukraine.

“There won’t be any prospect of funds for growing the market,” Fedor Bizikov, a money manager at GHP Group in Moscow, said on Friday. “It will be expensive for companies to borrow and not everyone will be able to.”

The additional yield investors demand to hold Russian corporate dollar bonds over emerging-market counterparts increased to 205 basis points on Friday, the most in more than five years, indices compiled by JPMorgan Chase show. Bond sales by Russian companies and regions this year have slid 52 percent to 461 billion roubles (R135bn).

Russia prevented privately managed pension funds from collecting new contributions this year as part of an industry overhaul. Soaring borrowing costs since the US expanded sanctions in the middle of last month have prompted Russia to cancel three local-currency bond auctions in a row.

Yields on debt due in February 2027 jumped to 9.82 percent on Friday from 8.77 percent on July 16, just before the penalties were imposed.

The rouble gained against the dollar for a second day yesterday, adding 0.2 percent to 36.0675 roubles by 12.26pm in Moscow. – Bloomberg