(Bloomberg) -- Russia’s first offering of international debt since 2013 is impossible this year if existing sanctions remain in place, according to a survey of economists.

The government in Moscow won’t return to global bond markets under sanctions in 2016, according to 23 of 30 analysts polled by Bloomberg. Just two economists expect the U.S. to relax its curbs in the next 12 months, with slightly more than half predicting the European Union will begin to loosen its restrictions, the survey showed.

“The U.S. is unlikely to ease sanctions ahead of presidential elections in November,” said Andreas Schwabe, an economist at Raiffeisen Bank International AG in Vienna. “Even after the elections, Russia may not be a top priority for a new administration, which would delay any action. In Europe, the EU will increasingly face difficulties to prolong sanctions.”

The continuing economic toll of the standoff over Ukraine is limiting Russia’s options as it tries to ride out a funding crunch and the widest budget shortfall in five years after oil’s collapse hobbled public finances. Facing pushback from authorities in the U.S. and Europe, Russia has missed out on the strongest rally in emerging-market bonds in seven years and is now considering an increase in domestic borrowing in the second half.

‘Normalize Relations’

“The government should focus on policies to normalize relations with the West, which should be conducive to the removal of mutual sanctions,” said Cristian Maggio, the London-based head of emerging-market research at Toronto Dominion Bank.

Sovereign ruble debt has rebounded in tandem with oil since late January, handing investors 36 percent in dollar terms, the biggest gains in the world after Brazil in a Bloomberg index tracking emerging-market bonds in their local currencies. Dollar-denominated sovereign bonds of developing countries have returned 6.9 percent this year, the most since the same period in 2009, according to JPMorgan Chase & Co. indexes.

The U.S. warned banks that participating in Russia’s Eurobond sale would run counter to its foreign policy and the EU told lenders to be “mindful” of the indirect risks of violating the bloc’s economic sanctions.

Banks Demur

While Russia itself wasn’t subject to the sanctions imposed on some of its biggest companies in response to President Vladimir Putin’s role in the Ukraine crisis, the U.S. advisory represents a red flag for the compliance departments of European lenders with American branches. As a result, major U.S. and European lenders declined to participate or raised conditions unacceptable to the Finance Ministry, bankers and government officials have said.

Russia has tried to put on a brave face, with Finance Minister Anton Siluanov saying in April that the government “isn’t closing the window of possibility” to offer Eurobonds. The authorities “are now considering whether we should go” ahead with a sale or not, Deputy Finance Minister Maxim Oreshkin said in a Bloomberg Television interview on Tuesday.

Russia is planning to shelve the plan for this year, two senior officials said last month. Since sanctions were imposed in 2014, a sale would have had more symbolic significance than fiscal benefit by showing the government could access markets despite the western limits, according to the officials. The planned $3 billion bond would have covered about a tenth of the deficit this year.

Goldman, Barclays

The Russian Finance Ministry in February invited 25 banks from nine countries, including Bank of China, Goldman Sachs Group Inc. and Barclays Plc, to organize the issue. All six American lenders approached to submit proposals indicated they won’t take part, people familiar with the plans said in March.

Penalties must stay until Russia “fully implements” the peace agreements on Ukraine that were signed last year in Minsk, Belarus, U.S. President Barack Obama said April 25.

The EU’s asset freezes and travel bans on 146 people and 37 companies were rolled over by six months until Sept. 15. The focus has now shifted to the bloc’s trade and investment curbs on Russia, which are due to lapse on July 31. Countries including Italy, Greece, Hungary and Austria have expressed discomfort with those penalties, though they stopped short of vetoing their prolongation last year.

“For the decision in summer 2016, we still expect that economic and financial sanctions to be prolonged, but there might be first easing steps at the horizon,” Schwabe said. “Possibly, the linkage to the ‘complete’ implementation to the ailing Minsk-II agreement may be replaced by softer conditions over the next year.”

--With assistance from Paul Abelsky To contact the reporter on this story: Andre Tartar in New York at To contact the editors responsible for this story: Balazs Penz at, Paul Abelsky

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