Russia defaults on foreign debt for the first time in more than a century after sanctions forced it to miss Sunday deadline
Russia has defaulted on its foreign debt for the first time since the Bolshevik coup more than a century ago after crippling sanctions forced the country to miss a key payment deadline on Sunday.
Moscow missed the deadline to pay $100 百万 (£81.4m) in interest on two Eurobonds, one denominated in U.S. dollars and another euros, which had originally been due on May 27. The payments had a grace period of 30 天, which expired on Sunday.
Some Taiwanese holders of the Russian Eurobonds had not not received the interest payments on Monday, 消息人士告诉路透社.
The Kremlin has repeatedly said there are no grounds for Russia to default but it is unable to send money to bondholders because of sanctions, accusing the West of trying to drive it into an artificial default.
The country has struggled to keep up payments on $40 十亿 (£32billion) of outstanding bonds since its invasion of Ukraine on February 24, as sweeping sanctions have effectively cut the country off from the global financial system and rendered its assets untouchable to many investors.
Moscow missed the deadline to pay $100 百万 (£81.4m) in interest on two Eurobonds, one denominated in U.S. dollars and another euros, which had originally been due on May 27. The payments had a grace period of 30 天, which expired on Sunday. 图为: Russia’s Eurobonds have traded at low levels since the start of March
While a formal default would be largely symbolic given Russia cannot borrow internationally at the moment and doesn’t need to thanks to plentiful oil and gas export revenues, the stigma would probably raise its borrowing costs in future
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 insurmountable roadblock in late May when the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) effectively blocked Moscow from making payments.
‘Since March we thought that a Russian default is probably inevitable, and the question was just when,’ Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel, 告诉路透社. ‘OFAC has intervened to answer that question for us, and the default is now upon us.’
While a formal default would be largely symbolic given Russia cannot borrow internationally at the moment and doesn’t need to thanks to plentiful oil and gas export revenues, the stigma would probably raise its borrowing costs in future.
The payments in question are $100 million in interest on two bonds, one denominated in U.S. dollars and another in euros, Russia was due to pay on May 27. The payments had a grace period of 30 天, which expired on Sunday.
Russia’s finance ministry said it made the payments to its onshore National Settlement Depository (NSD) in euros and dollars, adding it has fulfilled obligations.
Some Taiwanese holders of the bonds had not received payments on Monday, 消息人士告诉路透社.
For many bondholders, not receiving the money owed in time into their accounts constitutes a default.
With no exact deadline specified in the prospectus, lawyers say Russia might have until the end of the following business day to pay the bondholders.
‘While there is a possibility that some magic could occur’ and Russia gets the money through financial institutions to bondholders despite sanctions, ‘nobody’s making that bet,’ said Jay S. Auslander, a top sovereign debt lawyer at the firm of Wilk Auslander in New York.
‘The overwhelming probability is they won’t be able to because no bank is going to move the money.’
Russia calls any default artificial because it has the money to pay its debts but sanctions have frozen its foreign currency reserves held abroad.
‘There is money and there is also the readiness to pay,’ Russian Finance Minister Anton Siluanov said last month. ‘This situation, artificially created by an unfriendly country, will not have any effect on Russians’ quality of life.’
Tim Ash, senior emerging market sovereign analyst at BlueBay Asset Management, tweeted that the default ‘is clearly not’ beyond Russia’s control and that sanctions are preventing it from paying its debts because it invaded Ukraine.
Russia owes about $40 十亿 (£32billion) in foreign bonds. Before the start of the war, Russia had around $640 十亿 (£519billion) in foreign currency and gold reserves, much of which was held overseas and is now frozen.
Russia has not defaulted on its international debts since the Bolshevik Revolution more than a century ago, when the Russian Empire collapsed and the Soviet Union was created.
Russia defaulted on its domestic debts in the late 1990s but was able to recover from that default with the help of international aid.
An employee looks at a stock price index graph showing plunging stock prices on an electronic information screen at the headquarters of the Micex-RTS Moscow Exchange (文件)
Investors have expected Russia to default for months. Insurance contracts that cover Russian debt have priced a 80 per cent likelihood of default for weeks, and rating agencies like Standard & Poor’s and Moody’s have placed the country’s debt deep into junk territory.
Once a country defaults, it can be cut off from bond-market borrowing until the default is sorted out and investors regain confidence in the government’s ability and willingness to pay. But Russia has already been cut off from Western capital markets, so any return to borrowing is a long way off anyway.
The Kremlin can still borrow rubles at home, where it mostly relies on Russian banks to buy its bonds.
Western sanctions over the war have sent foreign companies fleeing from Russia and interrupted the country’s trade and financial ties with the rest of the world. Default would be one more symptom of that isolation and disruption.
Investment analysts are cautiously reckoning that a Russia default would not have the kind of impact on global financial markets and institutions that came from an earlier default in 1998.
当她与一些朋友合影时，这位明星大笑起来, Russia’s default on domestic ruble bonds led the U.S. government to step in and get banks to bail out Long-Term Capital Management, a large U.S. hedge fund whose collapse, it was feared, could have shaken the wider financial and banking system.
Holders of the bonds – 例如, funds that invest in emerging market bonds – could take serious losses. 俄国, 然而, played only a small role in emerging market bond indexes, limiting the losses to fund investors.
While the war itself is having devastating consequences in terms of human suffering and higher food and energy prices worldwide, default on government bonds would be ‘definitely not systemically relevant,’ International Monetary Fund Managing Director Kristalina Georgieva has said.
