Russia Defaults on Foreign Debt for First Time Since 1918

[LetMyPeopleVote]

Last edited Mon Jun 27, 2022, 12:08 AM - Edit history (1)

Source: Bloomberg

Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors.

For months, the country found paths around the penalties imposed after the Kremlin’s invasion of Ukraine. But at the end of the day on Sunday, the grace period on about $100 million of snared interest payments due May 27 expired, a deadline considered an event of default if missed.

It’s a grim marker in the country’s rapid transformation into an economic, financial and political outcast. The nation’s eurobonds have traded at distressed levels since the start of March, the central bank’s foreign reserves remain frozen, and the biggest banks are severed from the global financial system.

But given the damage already done to the economy and markets, the default is also mostly symbolic for now, and matters little to Russians dealing with double-digit inflation and the worst economic contraction in years.



Read more: https://www.bloomberg.com/news/articles/2022-06-26/russia-defaults-on-foreign-debt-for-first-time-since-1918?utm_source=twitter&utm_content=business&utm_campaign=socialflow-organic&utm_medium=social&cmpid=socialflow-twitter-business

[bucolic_frolic]

1. They blew all their capital in a war they can't win

How smart was that?

[Phoenix61]

4. That's what happens when you let ego drive your decision

making process. My heart breaks for what has been done to Ukraine but I couldn’t admire them any more for standing their ground.

[LetMyPeopleVote]

7. It will be fun to see how Putin tries to spin this

[OnlinePoker]

22. They have plenty of capital, just no way to access it.

Even their gold reserves have now been sanctioned.

[C Moon]

2. A drugged up leader. Like we had.

[Baked Potato]

3. Time to phone Vladdy and ask for a credit card number,

and a good address.

[dweller]

5. Uh oh repugs

there goes your under the table rubles …


✌🏻

[IronLionZion]

6. Less rubles for the NRA and GOP this election year

[IronLionZion]

20. Those 2 are too selfish to share with their other GOP folks

so that money likely went straight into their own offshore accounts

[AntiFascist]

8. Ah, they missed the May 27th deadline, Happy Memorial Day Putin! n/t

[Lil Liberal Laura]

9. Don't worry, Vlad!

Your sex-slave Donnie will just reach into one of his many trillion-dollar bank accounts and. . .oh. Wait.

Sorry.

[SergeStorms]

21. He just may have beaucoup dollars now.

There's no telling how much he stole from the American people, and there's always his cult to fatten his wallet anytime he asks.

I'm certain he could afford Vlad's interest payment, but I think the cash only flows one-way in that deal. Russia gets all the U.S. State secrets in return. The Big Orange Pig didn't take those boxes marked 'Top Secret' to Mar-ma-lardo by accident.

[NJCher]

30. there's the $250 million

He took from the rubes, supposedly to fight election fraud. Last I read, no records have been produced to show he spent any of that money for the purpose for which he promised.

About a week or so ago, there were many of the legal talking heads saying this could be major fraud.

[Irish_Dem]

10. Sociopaths are destroying the world. For their ego and control issues.

[SheltieLover]

15. Yes they are

[BumRushDaShow]

11. Have been following and waiting for a couple months for this

Russia defaults on debt for first time since 1998

By Ben King
Business reporter, BBC News

Published

36 minutes ago



Russia has defaulted on its debt for the first time since 1998 after missing a Sunday deadline to make a $100m interest payment. Russia has the money and is willing to pay, but sanctions made it impossible to get the payments to international creditors. The Kremlin has been determined to avoid a first default since 1998, and a major blow to the nation's prestige. The Russian finance minister branded the situation "a farce". Russia has seemed on an inevitable path to default since sanctions were first imposed by the US and EU following the invasion of Ukraine.

These restricted the country's access to the international banking networks which would process payments from Russia to investors around the world. The Russian government has said it wants to make all of its payments on time, and up until now it had succeeded. About $40bn of Russia's debts are denominated in dollars or euros, with around half held outside the country. The default is the first since 1998, at the chaotic end of Boris Yeltsin's regime.

The $100m interest payment was due on 27 May. Russia says the money was sent to Euroclear, a bank which would then distribute the payment to investors. But that payment has been stuck there, according to Bloomberg News, and creditors have not received it. The money had not arrived within 30 days of the due date, that is, Sunday evening, and so is considered a default. Euroclear wouldn't say if the payment had been blocked, but said it adheres to all sanctions.

Default seemed inevitable when the US Treasury decided not to renew the special exemption in sanctions rules allowing investors to receive interest payments from Russia, which expired on 25 May. The Kremlin now appears to have accepted this inevitability too, decreeing on 23 June stating that all future debt payments would be made in roubles through a Russian bank, the National Settlements Depository, even when contracts state they should be in dollars or other international currencies.

https://www.bbc.com/news/business-61929926

[madinmaryland]

12. Heh! So apparently Vlad is not the wealthiest man in the world...

I guess his wealth is a little less the tRump’s.

[Eyeball_Kid]

23. Vlad's fortune is frozen, not spent.

He didn’t default. Russia did.

[mobeau69]

13. Good job Joe! You got all the other countries together, held them together and made this work.

[pazzyanne]

26. + 1 nt

[SheltieLover]

14. ...

[machoneman]

16. O.K. but what are the real-world consequences of this default? Gvien this is a very rare event...

...one not encountered in like, forever, what does this really mean to their war effort, economy or anything at all?

Geez, one would think the Bloomberg would highlight any of the negatives right up front. Seems it's all symbolic (oil revenues) and will have ZERO impact on the Russkies. Yikes!

[LudwigPastorius]

19. Runaway inflation is a real possibility.

...followed by increasing unemployment.

[Wednesdays]

24. And if hyperinflation becomes like it was in Germany in 1923,

Rubles won't be even worth the paper it's printed on!



Here's a 20-million mark bank note from the time. In 1918, it would have bought 80 million loaves of bread.

In 1922, it would have bought 7 million loaves.

On New Year's Day 1923, it would have bought 40,000 loaves.

At the end of the month, it would have bought 28,500 loaves.

By July 1923, it would have bought 200 loaves.

In September, it would have bought two-thirds of a loaf.

In October 1923, it would have bought one two-hundredth of a loaf.

In November, it would have bought .0002 of a loaf.

[blue-wave]

40. Spot on

"Joes winning the Ukranian War against the folks who have been stealth attacking us since Obama."

They are using domestic malcontents to attack us from within.

Might I add Joe is winning the war against those who have been attacking the Western world, all continents included.

[Cha]

25. TY Pres Biden & the Western Democratic

World!💙

💙💛

💛

[lastlib]

27. Sorry Vlad, no more borrowing to finance your little war.....

Your credit rating just went to zero. Yathink Brudder Xi gonna bail you out of this one? Not if he's as smart as we suspect.

Maybe you could hock North Korea? That's not much security. You're in deep doo-doo, Vladdy.

[SouthernDem4ever]

28. I hope everyone remembers that Putin is Trumps BFF

Asshole.

[Historic NY]

29. they just shifted 200 million in gold

[link:https://www.bloomberg.com/news/articles/2022-06-21/switzerland-imports-russian-gold-for-first-time-since-invasion|]

Switzerland imported gold from Russia for the first time since the invasion of Ukraine, showing the industry’s stance toward the nation’s precious metals may be softening.

More than 3 tons of gold was shipped to Switzerland from Russia in May, according to data from the Swiss Federal Customs Administration. That’s the first shipment between the countries since February.

The shipments represent about 2% of gold imports into the key refining hub last month. It may also mark a change in perception of Russian bullion, which became taboo following the invasion. Most refiners swore off accepting new gold from Russia after the London Bullion Market Association removed the country’s own fabricators from its accredited list.

While that was viewed as a de facto ban on fresh Russian gold from the London market, one of the world’s biggest, the rules don’t prohibit Russian metal from being processed by other refiners. Switzerland is home to four major gold refineries, which together handle two-thirds of the world’s gold.

[littlemissmartypants]

31. Editing note...

You could have posted four unique paragraphs of content if you were to delete the two paragraphs that are redundant. ❤

[CloudWatcher]

32. And yet the Ruble is really strong?

I don't understand how the Dollar is so weak vs. the Ruble. Anyone have a clue? I sure don't.

https://wise.com/us/currency-converter/usd-to-rub-rate?amount=1#rate-alerts

[quakerboy]

33. Is this actually important?

Best I can tell the rouble is higher than it was last year, or at any point since 2015. Russia, last i checked, is making more per day on its oil than Ukraine is getting in aide.

So.. is there an actual consequence to this, or is it just another thing that means nothing in the face of india and china propping them up regardless?

Also.. maybe its time to consider whether India is a friendly country/valued trading partner?

[ColinC]

34. No clue. Although wasn't 1918 around the fall of the Russian empire

Marking the rise of the Soviet Union? Or something?

[Lovie777]

36. Well the infro from the internet . .....

December 1, 1991 lead to the final USSR collapse, and the country that nailed that outcome was Ukraine. Now I see why Putin hate the country so much.

[gab13by13]

35. Big Pharma has lots of factories in India,

where they make cheap drugs and ship them to America where they charge an arm and a leg for the cheap drugs.

[BumRushDaShow]

37. (late) NYT breaking on this now, but adds another tidbit of a caveat

Russia Misses Bond Deadline, Signaling Its First Default on Foreign Debt Since 1918


By Eshe Nelson

June 27, 2022 Updated 8:49 a.m. ET

Russia missed a deadline for making bond payments on Sunday, a move signaling its first default on international debt in more than a century, after Western sanctions thwarted the government’s efforts to pay foreign investors. The lapse adds to efforts to seal Moscow off from global capital markets for years.

About $100 million in dollar- and euro-denominated interest payments failed to reach investors within a 30-day grace period following a missed May 27 deadline. The grace period expired Sunday night.

A formal declaration of default would need to come from bondholders because ratings agencies, which normally declare when borrowers have defaulted, have been barred by sanctions from reporting on Russia. The Credit Derivatives Determinations Committee, a panel of investors that rules on whether to pay out securities linked to defaults, hasn’t been asked to make a decision on these bond payments yet.

But it appeared that the payments had not reached bondholders’ accounts as of Sunday night, as required by the bonds’ contracts. On Monday, Russia’s finance ministry said it had made the payments in May and they had been transferred to Euroclear, a Brussels-based clearinghouse, but subsequently blocked from reaching bondholders.

https://www.nytimes.com/2022/06/26/business/russia-default.html

[dupagelib]

38. Who holds this debt?

How does it affect them and what recourse do they have?

[Turbineguy]

39. Now they can spend that money on the war.

And put-off that evil day of reckoning.

[LetMyPeopleVote]

42. The sanctions imposed by President Biden and our allies, since the invasion of Ukraine in February,

Link to tweet