Russian defaulted on its foreign-currency sovereign debt for the first time in more than a century as a result of sanctions imposed by the West for its involvement in the Ukraine War, further alienating it from the global financial system. The Kremlin has resisted being designated as in default, claiming that the West’s closure of its payment channels to foreign creditors has driven it into non-payment even though it has the resources to do so.
Last month, A statement from Russian finance minister Anton Siluanov said,
There is money and there is also the readiness to pay.
This situation, artificially created by an unfriendly country, will not have any effect on Russians’ quality of life.
While Russia has been finding ways to avoid the sanctions imposed as a result of the invasion of Ukraine for months, it missed the deadline on Sunday night to comply with a 30-day grace period on interest payments that were initially due on May 27.
About the debt default:
About half of the $40 billion in foreign bonds that Russia is in debt to are held by foreigners. A large portion of its gold and foreign currency holdings were kept abroad and are currently frozen. During the Bolshevik Revolution, when the Russian Empire fell and the Soviet Union was established, Russia last defaulted on its foreign debt.
During the 1998 financial crisis and ruble devaluation, Russia missed payments on $40 billion of its domestic obligations. but used foreign assistance to bounce back from that default. A formal statement of default would typically come from rating agencies, but because of the European sanctions, they have stopped rating Russian enterprises. If holders of 25% of the outstanding bonds concur that a “Event of Default” has taken place, the bondholders can now act on their own.
Analysts are cautiously predicting that the failure would not have the same type of impact on international financial markets and institutions as did a prior default in 1998, according to the Associated Press.
Image Credits: Wallpaperup
💫FOLLOW US FOR MORE UPDATES. ❌WE DO NOT HAVE IRRITATING AND SPAMMY NEWSLETTERS. ✅EVERYTHING IS AND WILL BE FREE FOREVER. SEE YOU AGAIN IN YOUR STORIES AND FEED 🙂
