Kremlin denies and says ‘non-receipt of money by investors is not a result of non-payment’, but of Western sanctions
For the first time in over a century, the Russia defaulted on its foreign sovereign bonds, the White House said on Monday, 27. This achievement is related to the sweeping sanctions that excluded the country from the global financial system and made its assets untouchable. According to the statement by a US official, this Russian default situates the “strength of the actions that the Americans, together with allies and partners, have taken, as well as the impact on the Russian economy”. Because of the sanctions ordered in response to its offensive in Ukraineabout to complete five months, Russia can no longer make transfers in Western currencies to pay the interest on its foreign debt acquired in dollars or euros.
The payments in question are $100 million in interest on two bonds, one denominated in dollars and the other in euros, which Russia was due to pay on May 27. The payments had a 30-day grace period, which expired on Sunday. The last time the country of Vladimir Putin had defaulted was in 1918, during the Bolshevik Revolution, when Lenin decided not to pay the Tsarist regime’s debts. However, in 1998, nearly two years before Putin reached the KremlinRussia, hampered by the effects of the fall of the Soviet Union, the crisis in Asian economies and falling commodity prices, found itself in default on its national debt and forced to impose a moratorium on its foreign debt.
A formal default would be largely symbolic, as Russia cannot borrow internationally at the moment and does not need to do so thanks to abundant oil and gas export earnings. But the stigma will likely increase your borrowing costs in the future. The Kremlin rejects the information, but admitted that, due to international sanctions, two payments did not reach its creditors by the deadline on Sunday. “The failure of investors to receive the money is not the result of a non-payment,” the finance ministry insisted in a statement. “But it is caused by the action of a third party, something that is not directly considered a default,” he added.
“Allegations about a cessation of Russian payments are absolutely illegitimate,” Kremlin spokesman Dmitry Peskov told the press. Russia’s Ministry of Finance said it had made payments to its National Settlement Depository (NSD) in euros and dollars, adding that it had complied with its obligations. In a call with reporters, Kremlin spokesman Dmitry Peskov said Russia made the bond payments due in May, but the fact that they were blocked by Euroclear because of Western sanctions on Russia “is no problem.” our”.
Russia has struggled to meet payments on $40 billion in bonds since its invasion of the Eastern European country. “Since March, we had thought that a Russian default was likely to be inevitable, and the question was just when,” Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel, said ahead of Sunday’s deadline. Russia’s efforts to avoid what would be its first major default on international bonds since the Bolshevik revolution more than a century ago hit a snag in late May when the US Treasury Department’s Office of Foreign Assets Control effectively blocked Moscow from making payments.