Sanctions lead Russia to its first non-payment of foreign debt since 1918 – Axios

Russia is set to the default value foreign exchange government debt after bondholders reported that the Kremlin missed two payments late Sunday, according to Wall Street Journal.

Why it matters: This is a predictable outcome sanctions imposed cause of invasion of Ukraine, although Russia has been successfully pushing back the inevitable for months. For now, default has been largely highlighted by its symbolism as Russia’s first default on foreign debt since 1918, reflecting the country’s international status and a crumbling economy.

Our thought bubble, via Axios ’Felix Salmon: Bond defaults usually occur because the issuer does not want to make a payment. In this case, Russia obviously was willing do so; it just wasn’t there capable to.

Big picture: Russia did not pay on international debts since the Bolshevik revolution, although domestic debt collapsed during the 1998 financial crash.

  • Russian officials struggle with $ 40 billion in outstanding bond payments from US and allies set out to impose sanctions to the ground after Putin’s forces launched an invasion last February.
  • Russian President Vladimir Putin signed a decree on an interim measure last week giving the government 10 days to select banks to make payments under the new scheme, indicating that Russia will consider its debt obligations fulfilled by paying bonds in rubles, Reuters reports.

What to watch: Although the deadline for Russian officials to comply with the 30-day grace period originally due on May 27 has passed, it could be some time before the default is confirmed, AP notes.

Editor’s note: This article has been updated with more details on outstanding Russian bond payments and further context.

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