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Russia and Europe disagree on sovereign debt default
Economic Daily
Western media said that Russia will face a sovereign debt default due to its failure to repay its debt in the specified currency (US dollar). Russia denies this, saying that it has sufficient resources and willingness to repay the debt, and the United States, Europe and other countries set up obstacles to Russia’s debt repayers, which will eventually affect itself. The Russian side believes that this incident will not only affect Russia itself, but will also have far-reaching international influence, which will lead to a decline in the world‘s confidence in reserve currencies such as the US dollar and the euro, and will also destroy the trust in international institutions.
Recently, Western politicians and some Western media have been hyping up that Russia will face a sovereign debt default due to its failure to repay its debts in the specified currency (USD). Russia denies this, saying that it has sufficient resources and willingness to repay the debt, and the United States, Europe and other countries set up obstacles to Russia’s debt repayers, which will eventually affect itself.
According to the forecast of Moody’s, an international rating agency, Russia may face a default after May 4. The agency said that Russia’s recent repayment of two sovereign bonds in rubles was inconsistent with the payment terms of the original contract. If the situation does not change before the end of the grace period, it will be considered a default. Moody’s said a sovereign debt default would be one of the most serious consequences of Russia’s military action being excluded from the Western financial system.
In addition, the global rating agency Standard & Poor’s downgraded Russia’s foreign currency debt credit rating from “CC/C” to “SD/SD” (selective default), and the local currency rating was maintained at “CC/C” with a negative outlook. The agency pointed out that the main reason for the downgrade was the Russian government’s announcement that it would pay the coupon and principal of Eurobonds in rubles. However, the agency is skeptical that investors will be able to convert rubles into U.S. dollars and receive the expected income.
It is understood that on March 16, Russia paid $117.2 million in European bond coupons due in 2023. In early April, the United States announced that it would prohibit Russia from paying its debts in U.S. dollars from U.S. bank accounts. On April 4, the Russian Ministry of Finance paid $649.2 million in principal and coupons of Eurobonds at the official exchange rate of the day, and transferred the funds to the national settlement depository. The Russian Ministry of Finance stated that the “Russia 2022” and “Russia 2042” bond obligations have been fully fulfilled. Western media said that Russia has a 30-day grace period to prevent breach of contract. If Russia cannot resolve it before the end of the grace period, it will be regarded as a breach of contract. European Commission President von der Leyen said that Western sanctions affect Russia’s economic stability, and it is only a matter of time before it defaults.
Russia has firmly denied its sovereign debt default. Russian President’s Press Secretary Peskov said that at present Russia has no clear reason for default, and Russia has all the necessary potential to fulfill all obligations. The decision of international rating agencies to downgrade Russia’s long-term and short-term foreign currency debt credit ratings to “selective default” has no effect. according to. Bank of Russia Governor Nabiullina said that Russia has all the necessary financial resources and Russia will not be threatened by default.
Both Russian officials and experts believe that Russia will not have a typical sovereign debt default. The Russian Ministry of Finance commented that a default means that the debtor has no funds to fulfill its debt obligations, or has funds but is unwilling to fulfill these obligations. As far as Russia is concerned, neither situation exists.
On the one hand, Russia has sufficient funds to repay its debts. The Russian Ministry of Finance stated that the Russian Federation has sufficient funds to repay all debts in a timely manner. Aksakov, chairman of the Russian State Duma Financial Market Committee, said that Russia wants to repay its debts, but it is not allowed to do so. The sanctions imposed by Western politicians do not allow Russia to pay. He also said that considering the available reserves and economic potential, Russia today is one of the most solvent countries in the world. Russia sells oil and natural gas to obtain income, and a few days ago, an additional income of 270 billion rubles was transferred to government reserves. fund.
On the other hand, Russia has the willingness to fully repay its debts. Russian Finance Minister Siluanov said that Russia, as a reliable borrower, has done everything possible to repay Eurobonds in the agreed currency (mainly US dollars). However, Western countries have created obstacles artificially by unscrupulous means. The foreign exchange account of the Russian Ministry of Finance and the gold and foreign exchange reserves of the Central Bank have also been frozen. The West has prohibited Russia from using the frozen funds to repay its debts. Even so, Russia is trying to pay Eurobondholders in rubles, Siluanov said. According to the presidential decree, Russia transferred ruble funds to special accounts opened in Russian depository institutions. Foreign holders of Russian debts can obtain the accounts and purchase new securities issued by the Ministry of Finance and other businesses, and can also convert ruble funds into foreign currencies. . The Russian Finance Minister said that if an economic and financial war is launched against Russia, Russia will be forced to respond, but it will still fulfill all its obligations.
The current disagreement is that Russia is willing to pay rubles to fulfill its Eurobond obligations after the U.S. dollar, gold and other accounts are frozen, while the West insists that this is a breach of contract. The Russian Finance Minister said that if a breach of contract is declared, Russia will resort to the law, and Russia will present a payment certificate in court, indicating its efforts to pay in foreign currency and rubles. Fedosova, deputy director of the Institute of Strategic Research and Forecasting at the Russian People’s Friendship University, said that the US was not the initiator of the announcement of Russia’s default, and Europe would not benefit from it.
Russia believes that this matter will not only affect Russia itself, but will also have far-reaching international influence. Siluanov said that on the one hand, the current crisis shows that the so-called “democracy, inviolability of private property” and other Western values are collapsing, and the objectivity of its judicial system is also questionable; on the other hand, the international financial and legal system may Restructuring, world confidence in reserve currencies such as the dollar and euro has fallen. In addition, trust in international institutions will also be undermined, as the conduct of relevant international institutions is severely disrupted by political factors, and if a party does not support the course pursued by the major shareholders of these institutions, there will be no access to relevant resources.
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Responsible editor: Li Ang