The US is cutting off another financial route for Russia to pay its international debts, a move that could push the country closer to default.
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The country has almost $2 billion worth of payments that will be due up to the end of the year on its international bonds.
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A default would mark the first time Russia has failed to pay its government debt since 1998 - the economic crisis at the end of then President Yeltsin’s term in office.
It would likely trigger a court case, opening up Russia to recovery proceedings from creditors.
I was living in Germany at the time and there were reports of Russian soldiers starving to death in the Eastern regions. Their commanders had them working on farms in return of some of the produce to feed them. Many Russians of German descent moved to Germany under the old citizenship rules in force at the time. When the Canadian military abandoned Lahr and Baden the (German) Russians moved in.
The US is cutting off another financial route for Russia to pay its international debts, a move that could push the country closer to default.
Russia pushed into historic default by sanctions www.reuters.com/markets/europe/russia-slides-towards-default…
Russia defaulted on its international bonds for the first time in more than a century, the White House said, as sweeping sanctions have effectively cut the country off from the global financial system, rendering its assets untouchable. The Kremlin, which has the money to make payments thanks to oil and gas revenues, swiftly rejected the claims, and has accused the West of driving it into an artificial default.
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My Position: Default is not a sign of strength by Russia, it’s a sign of stupidity by the West. Instead of paying bills, Russia gets to keep reserves. Instead of getting money, corporations, mainly in the EU, get nothing. This is a really stupid thing for the West. Period.
My Position: Default is not a sign of strength by Russia, it’s a sign of stupidity by the West. Instead of paying bills, Russia gets to keep reserves. Instead of getting money, corporations, mainly in the EU, get nothing. This is a really stupid thing for the West. Period.
The linked page appears broken to me. Lots of blank space with no content. So I don’t have much to go on.
But I suspect Mish is talking from a strictly business/economics perspective here. Sanctions and forced sovereign defaults are always a bad idea if you only look at money. However, this isn’t a financial decision. It is a political decision.
Yes, sanctions and defaults hurt both sides. They are a calculated risk - that the pain to your adversary will be worse than the pain to you. Given that the US economy is an order of magnitude larger than Russia’s, if the dollar amount of the pain is the same to both sides, it should be 10 times worse on a percentage basis in Russia. Then add in that many other countries are also sharing the economic burden of these sanctions and defaults, while Russia is not sharing
Another aspect in this particular case is interrupting Russia’s ability to fight a war. The more disruptions you can put on your enemy, the harder it is for them. Again, the cost to one side economically becomes a cost of fighting a war.
So I think Mish is right on the economics, but has completely ignored the reason for imposing sanctions and economic pain on Russia. And those reasons may or may not outweigh the economics - depending on your politics. Which is an issue to be discussed elsewhere.