Russia is Already Close to Default

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The Russian government will repay $117 million for interest on two sovereign bonds it issued in 2013 in dollars-denominated. Moscow offered to cover the interest in rubles, which is a non-starter in international finance.

What’s the matter?

According to Reuters, Guido Chamorro (Pictet’s emerging markets portfolio manager Guido Chamorro) stated that defaults can be complicated.

When Greece nearly defaulted on hundreds of billions of dollars in loans, it was the last major sovereign debt crisis. It was fraught with uncertainty until the European Central Bank intervened to provide a cash injection to rescue Greece.

Russia will not be eligible for such a bailout.

He was referring to the situation where no coupon payment has been made. ”

Two people familiar with the matter stated that creditors hadn’t received funds by close of business in London.

Anton Siluanov (Russia’s Finance Minister) stated that Moscow had received the payment. Washington was given the task of confirming whether the settlement was possible.

It is difficult to understand the devastating effects of sanctions against Russia.

It had $650 billion worth of foreign currency and gold reserves. S&P Global and Moody’s also gave the company investment-grade credit ratings. Fitch was also a Fitch member. It was able to sell oil and gas at a high price, making hundreds of millions per day.

The tanks marched, and the United States, Europe, and their Western allies responded by imposing unprecedented sanctions. The frozen nearly two-thirds of Russia’s reserves, and they were later found to be held abroad.

Russia’s debt obligations will not be paid unless war ceases within days. Any future loans from Russia to other countries will be subject to a premium.

Gazprom and Rosneft may be able to pay the bonds. But this is only temporary and Putin might have to accept the default and eat the debt.