Origins and implications of Russia’s first international debt default since its invasion of Ukraine – BBC News

But according to Bloomberg News, the repayment has been stuck at the European Bank for Settlement, and creditors have so far not received interest repayments from Russia.

Reuters also quoted two sources as saying that some Taiwanese investors holding euro-denominated Russian bonds have also not received interest payments.

According to international practice, the money must be transferred to the debtor’s account within 30 days of the due date, that is, by June 26.

Now that the deadline has passed, Russia is considered to be in default.

The European Bank for Settlements would not say whether it blocked the payment, but said it fully complied with all sanctions imposed after Russia’s invasion of Ukraine.

According to RIA Novosti, Russian Finance Minister Anton Siluanov admitted that foreign investors would “not be able to receive” the payments.

Since Russia is both willing to pay and has enough money to pay, Siluanov denies that this is a real default.

“Everyone who understands the situation understands that this is not a breach of contract at all. This whole thing looks like a farce,” he said.

The so-called debt default, in layman’s terms, is the failure of the borrowing country to repay the debt as agreed.

The Bank of Canada and the Bank of England, which track global sovereign defaults, estimate that the total value of government debt that defaulted globally in 2020 is $443.2 billion, or about 0.5% of the world‘s public debt.

Governments that have defaulted recently include Argentina, Belize, Ecuador and Suriname, which have been unable to keep up with payments denominated in foreign currencies.

In February 2022, after Russia launched the war of invasion of Ukraine, the international community’s sanctions against Russia continued to escalate, including the United States, the European Union, the United Kingdom and Canada and other Western powers issued a joint statement prohibiting the Central Bank of Russia and several major Russian banks. SWIFT, the “global interbank system,” hits Russia’s foreign reserves.

Countries that default on their debts are usually no longer able to borrow from international markets, but Russia has effectively been sanctioned against borrowing in Western markets. From this perspective, this debt default is largely symbolic.

Russia reportedly earns about $1 billion a day from oil and gas exports, and Finance Minister Siluanov said in April that Russia has no plans to borrow more.

Chris Weafer, chief executive of Moscow-based consultancy Macro Advisory, also said on BBC Radio 4’s morning program “Today” that Russia does not currently Funding needs to be raised internationally, as Russia derives its revenue from high-priced commodities such as oil.

But he said the debt default would trigger creditors to demand that Russia pay off other debts.

About $40 billion of Russia’s debt is estimated to be denominated in dollars or euros, with about half of that held abroad.

“Parts of these debts are now automatically due, because all debt contracts have prepayment clauses,” Vivre said. “If you default on one debt, it usually triggers immediate payments on other debts, so Russia is now facing a An immediate debt repayment request of approximately $20 billion.”

Wilf also expects that the Russian debt default will also cause “legacy problems” in the future. Even if the Ukrainian issue is resolved in the future and Russia’s relations with the international community are improved, the debt default will continue to be a shadow of economic recovery, making it more difficult for Russia’s economic recovery.

The last time Russia defaulted on its debt was in 1998, at the end of the Yeltsin regime and economic chaos.

On August 17, 1998, the Russian government devalued the ruble, defaulted on domestically issued national debt, and announced a moratorium on repayments to foreign creditors. This is the Russian financial crisis that shocked the world.

Russia’s default on domestic rouble bonds that year led the U.S. government to step in, asking banks to bail out a large U.S. hedge fund amid concerns that the fund’s failure could shake the broader financial and banking system.

The Russian debt default will not have the same impact on the international financial market that year, although the Russian-Ukrainian war has pushed up global energy and food prices.

Russia’s debt default has been inevitable since the United States and the European Union first imposed sanctions following Russia’s invasion of Ukraine. Sanctioned Russia has been denied access to the international banking network SWIFT, which has blocked Russian payments to investors around the world.

The Russian government has consistently said it wants all payments to be made on time, with no major problems so far as the United States still specifically exempts Russia from paying its international debts through U.S. banks.

But on May 25, the U.S. stopped that special waiver, leaving Russia no longer able to repay its international debt through U.S. banks.

In this regard, the Russian authorities seem to accept that this is inevitable.

Russia’s June 23 decree stated that all future debt payments, even if the contract stipulates that they should be paid in dollars or other international currencies, will be paid in rubles through the Russian State Settlement Depository Corporation.

Western sanctions have driven foreign companies out of Russia, and Russia has been cut off from trade and financial ties with Western countries.

This default would be another symptom of Russia’s political isolation and economic damage.