For months, Russia has been finding ways to circumvent sanctions imposed by Western countries following the invasion of Ukraine. But on Sunday, the 30-day grace period for interest payments of about $ 100 million due on May 27 expired.
Insolvency (default) in foreign currency bonds was found Russiafor the first time in a century, due to Western sanctions, which ruled out the options it had to pay its foreign creditors.
For months, Russia has been finding ways to circumvent sanctions imposed by Western countries following the invasion of Ukraine. But at the end of the day, Sunday, the 30-day grace period for interest payments of about $ 100 million due on May 27 expired.
The default is another episode in the series of the transformation of Russia into a country of economic and political fringe. Russian foreign currency bonds have been showing distressed prices since early March, the central bank’s foreign reserves remain “frozen” and Russia’s largest banks are cut off from the global financial system.
But given the damage already done to the economy and markets, the default is mainly symbolic for now, notes Bloomberg, explaining that it matters little to Russians, who are already facing double-digit inflation and the worst economic contraction in several years.
Russia insists it has the funds to service its debt, but has been forced to default on payments. In a maneuver, he announced last week that $ 40 billion in debt service would be paid in rubles, criticizing the West for what it says has created a “force-majeure” situation that prevents it from paying.
“It’s very, very rare for a government that otherwise has the resources to be forced by a third government to go bankrupt,” Loomis Sayles & Company’s Hassan Malik told Bloomberg.
The official announcement of the default should normally have come from the rating agencies, but their sanctions forced them to withdraw their ratings.
It is noted that during the Russian crisis and the collapse of the ruble in 1998, the Yeltsin government had declared a suspension of payments on domestic debts of $ 40 billion.
The last time Russia defaulted on its foreign creditors was a century ago, when the Bolsheviks under Lenin defaulted on the debt of the tsarist era in 1918. At present, it is estimated to be close to 1 trillion. Dollars.
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