Russia has sent the clearest signal yet that it will soon default — the first time it will have failed to meet its foreign debt obligations since the Bolshevik revolution more than a century ago.
Half of the country’s foreign reserves — roughly $315 billion — have been frozen by Western sanctions imposed after the invasion of Ukraine, Russian finance minister Anton Siluanov said on Sunday. As a result, Moscow will repay creditors from “countries that are unfriendly” in rubles until the sanctions are lifted, he said.
Credit ratings agencies would likely consider Russia to be in default if Moscow misses payments or repays debt issued in dollars or euros with other currencies such as the ruble or China’s yuan.
Credit ratings agencies would likely consider Russia to be in default if Moscow misses payments or repays debt issued in dollars or euros with other currencies such as the ruble or China’s yuan.
Jeff
The ruble is no good, but isn’t the yuan fully convertible? Moderately stable.
How did Argentina recover after (multiple) defaults?
With extreme economic pain. High inflation, high unemployment, reduction in the standard of living, and political unrest.
Bringing this back to Russia, yes Putin can nationalize stuff, but no one will want to invest there after that. Not in any meaningful way. Default also means higher borrowing costs. Not good if you need to borrow to finance a war.
Over the decades Putin has consolidated power by stripping local officials/barons of power and moving it to those closest to his inner circle: the oligarchs. Putin controls the oligarchs by making them rich and occasionally imprisoning or killing them. The risk to Putin is if he isn’t making the oligarchs rich, then they don’t need Putin for anything.
… the first time it will have failed to meet its foreign debt obligations since the Bolshevik revolution more than a century ago.
Nope. Russia defaulted in 1998.
The Russian financial crisis (also called ruble crisis or the Russian flu) hit Russia on 17 August 1998. It resulted in the Russian government and the Russian Central Bank devaluing the ruble and defaulting on its debt. The crisis had severe impacts on the economies of many neighboring countries.
The evening news reported the same as we have been hearing since yesterday, Putin wants both military equipment and money from China…so the dollars we send to China for their trinkets could wind up financing Putin’s invasion of Ukraine.
Speaking of the “news”, they have been reporting the Russian army “closing in” on Kiev, daily, since the invasion started. Where is the dividing line between “closing in” and “stopped”?
Credit ratings agencies would likely consider Russia to be in default if Moscow misses payments or repays debt issued in dollars or euros with other currencies such as the ruble or China’s yuan.
Jeff,
Russia has the ability to pay with gold.
Watching mothers and children bombed and chased out while their hospitals, schools, churches, and homes are obliterated, it suddenly becomes understandable why the Treaty of Versailles treated the aggressor so severely.
Once this is over, I expect some Europeans will want to impose terms upon Russia as onerous as the Treaty of Brest-Litovsk. However, in lieu of giving up current Russian territory, Putin could pay in oil, gas, gold, diamonds, and minerals. Putin should be forced to sign an agreement to pay reparations to Ukraine and rebuild every square inch his minions have bombed into rubble.
