What Happens When Russia Lost Its Debt?

WASHINGTON – Russia is on the verge of repaying its foreign debt, a shocking unprecedented event since the Bolshevik Revolution over the last 100 years and one that raises hopes for years of legal disputes and international crackdown on Russian government officials. goods.

Failure to repay the loan is a result of sanctions that have hampered nearly half of Russia’s $ 640 billion foreign investment, preventing the country from repaying the debt using the amount of the loan – the dollar. Based on dishonesty, Russia has previously denied any “action” due to sanctions imposed by the United States and its allies, and has threatened to sue in court.

The impending conflict, which could include Russia and international investors, raises serious questions about who can decide if the country has failed to repay its debts that have prevented the country from repaying its debt.

Russia appears to have taken the declaration of infidelity lightly. If that happens, it could raise Russian lending rates for years to come and shut down major global markets, given the economy is already expected to fall sharply this year. It could also be a financial blow to President Vladimir V. Putin that could justify Russia’s involvement in the Ukraine attack.

The risks to Russia, which has been plagued by years of serious trade ties with the United States, Europe and other countries, are one of the factors contributing to economic growth: the possibility of better borrowing beyond its borders.

Since the Russian crisis is very unusual, it is a well-known question that is the main culprit in debt repayment.

“This shows that the mortgage market is in dire straits,” said Tim Samples, a law professor at Georgia’s Terry College of Business and an independent creditor. “I think this should be distorted and criticized for a variety of reasons.”

Mr Samples said there could be “events” that would make Russia unstable.

A direct decision could come from major credit bureaux, which have already shown that creditworthiness in Russia is declining and that dishonesty is imminent.

Last week, Moody’s warned that Russia’s $ 650 million debt repayment on rubies on April 4 could be considered non-refundable if it does not change and pay in dollars by May 4, after a 30-day grace period. . This followed a similar warning earlier in the week for S&P Global, which put Russia under “vote selection”.

But it is unknown at this time what he will do after leaving the post. Moody’s and S&P spokespersons did not respond. Fitch’s spokesman said he could not comment on most of Russia’s sanctions.

The Biden government stepped up pressure on Russia earlier this month when the finance ministry began banning Russia from repaying its debts in US dollars. The new ban was forcing Russia to choose between shedding the remaining Russian money or using the new currency (from gas payments, for example) to pay off debts and avoid repaying its debt.

Russia can still repay its debts to Russia as long as it does not attempt to use funds from Russian government accounts that occur in American financial institutions.

After the grace period on foreign currency payments expires on May 4, the next most important moment will be May 25. That is when American architects will not be able to accept Russian debt repayments under the temporary release granted by the Treasury Department.

Although the decision of the accounting agencies is very heavy, the holders of the bond will see the consequences of Russia’s failure to pay what it owed or to violate the terms of its treaties. Bonds can take a wait-and-see approach and see or declare that bonds should be paid immediately, which could lead to some bonds with “cross default default” being unstable.

Another potential source of uncertainty is the Credit Derivatives Determination Committee, a non-profit organization that specializes in uncontrolled insurance, or credit-card exchange. The committee is discussing whether Russia’s fees in rubles are like a “failure to pay,” which could lead to insurance payments. The commission has already ruled that the Russian government Railways JSC has not reimbursed it for non-compliance with the bond.

For some experts, that idea and the payment of the ruble means that Russia is already technically advanced.

“If Russia does not pay on time, it does not pay the contract, it is unstable – it makes sense,” said Timothy Ash, an independent expert at BlueBay Asset Management. “For all intents and purposes, Russia has already failed.”

Mistakes have already been made in the courts. Argentina was disrupted in 2014 after negotiations with hedge funds that refused to accept a minimum wage were broken and a U.S. federal judge ruled that it could not make its regular payments on bond without paying operating fees. The United States Supreme Court rejected Argentina’s appeal in the case.

Russia’s case is special because of the sanctions, and he is expected to say that his ability to pay off the money in the bond deal has been withheld because he cannot pay the full amount.

Ash said it would be difficult for Russia to find a court that agrees with Russia’s actions.

“The U.S. court will not rule against OFAC,” Ash said, referring to the U.S. Treasury Department of Foreign Assets Control, which oversees the case.

But Samples pointed out that, given Russia’s small size, creditors would not have to struggle to seek Russian assets even if they won a favorable court ruling.

He predicted that Russia would look into ways to avoid having to repay the debt, such as by pointing out a language that could not be considered in a bond that could be interpreted as a way to pay extra bills or to apply for a friendly court, possibly in Russia.

“I expect them to follow their own rules,” Samples said.

Despite the signs of infidelity, the economic impact on Russia and the world may be small.

Economists estimate that Russia’s total foreign debt is about $ 75 billion, while Russia’s annual electricity sales are about $ 200 billion. Proponents of her case have been working to make the actual transcript of this statement available online.

Eventually, the market will determine whether Russia is in debt, and its actions in Ukraine and future sanctions will guarantee the future of its economy.

Anna Gelpern, a professor of law at Georgetown who specializes in independent debt management, said: “It feels like a lot of fun and dressing up in the most difficult of situations.” “They drink from a fire hydrant until the money they earn, so why should they rent?”

Leave a Comment

Your email address will not be published.