(Washington) The US Treasury announced, on Tuesday, the termination of an exemption allowing Moscow to pay its debt in dollars as of 12:01 a.m. Wednesday, Washington time, a decision that may precipitate Russia in default.
Posted yesterday at 6:16pm.
The measure will take effect two days before the deadline for Moscow’s next payment, which covers just over $100 million in interest on the bonds.
to me Wall Street MagazineQuoting the official Russian news agency TASS, the authorities would have already paid the interest.
Besides the May 27 deadline, the Russian government still has to meet 12 payments by the end of the year. So non-payment seems inevitable.
Since the start of Western sanctions against Russia, in response to the invasion of Ukraine that began on February 24, this exemption had until then allowed Moscow to escape from it.
US Treasury Secretary Janet Yellen said last week that Washington had agreed to a temporary exemption to “allow for an orderly transition and allow investors to sell their securities.”
Towards a legal battle?
Then US President Joe Biden’s Treasury Secretary indicated that this exemption is “likely” to expire on Wednesday.
Since the beginning of April, Russia can no longer repay its debts with dollars held in American banks.
The governor of the Russian Central Bank, Elvira Nabiullina, admitted at the end of April that Moscow was facing “repayment difficulties”, but refused to talk about the default.
Russia’s external debt, according to the Ministry of Finance, is approximately 4,500-4,700 billion rubles (about fifty billion euros at the current rate), or 20% of the total public debt.
Russia defaulted on its domestic ruble debt during the 1998 financial crisis, but has not defaulted on its foreign debt since 1918, when Bolshevik leader Vladimir Lenin refused to recognize debts inherited from the tsarist regime, which was overthrown in the 1917 revolution.
In the event of a default, the Russian government will lose access to an important source of financing or be forced to pay exorbitant interest rates even if it can no longer in fact be able to raise funds due to Western sanctions.
For their part, the unpaid debt holders risk losing all or part of their money.
There may also be a legal battle since Russian Finance Minister Anton Siluanov indicated in April that Russia would initiate the measures if the West announced its default.
Then he accused Western countries “artificially” of creating the conditions for default.
Like all countries, Russia borrows money in the form of bonds, often in dollars, and must regularly pay interest and repay the principal.
A country is considered in default when it is unable to meet its obligations to its creditors.
“Food trailblazer. Passionate troublemaker. Coffee fanatic. General analyst. Certified creator. Lifelong music expert. Alcohol specialist.”