Rome, June 26, 2022 – Russia returns to the abyss of default: after having avoided it for months thanks to quibbles and ploys, now Putin will have to deal with the financial storm triggered by the West to stop his mad invasion of Ukraine. This would be the first national default since 1918, when after the Bolshevik revolution Moscow did not pay the debts of the tsars (In 1998, with the ruble crisis, the Russian Federation instead declared itself in default on its internal debt).
There are at stake $ 100 million in interest on two bonds, one denominated in dollars and one in euro maturing in 2026 and 2036. On May 27, Moscow had to pay two bonds, but a period was granted 30 dayswhich expire at midnight today.
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The broad sanctions are making it impossible for Russia keep payments sui $ 40 billion in bonds in circulation: Moscow it is unable to send money to bondholders due to blockages. According to the Kremlin, the default would be without reason, e artificial because it was wanted by the West that pushed Russia into this situation.
The technical default will be triggered in the morning, when investors do not collect their money within the allotted time. But Moscow doesn’t seem too worried and Russian Finance Minister Anton Siluanov said in recent days: “Anyone can declare what they want and can try to attach any label to Russia. But anyone who understands the situation knows that this is in no way a default. “
The blocking of Moscow’s payments was made effective by the Office of Foreign Assets Control (Ofac) of the United States Department of the Treasury, which did not renew the license that exempted American investors from sanctions making it impossible for the Russians to pay the debt in dollars or in the currencies of the prospectus of issues.
When asked about the Russian default, Ofac clarified: “Although formal, it would be largely symbolicgiven that Russia cannot take out international loans at the moment and does not need it thanks to its rich oil and gas receipts, the ‘brand’ would likely increase its borrowing costs in the future. “