Russia last went bankrupt in 1998. It overthrew the country’s economic crisis, which led to the collapse of several Russian banks.
Russia is on the verge of historical insolvency.
Money markets are waiting to see if Russia will be able to pay the $ 100 million tranche of government bonds due on Sunday.
The one-month grace period for debt payments that originally matured on May 27 ends on Sunday night.
Among other things, they talk about it BBC, Financial Times, Business Insider and Bloomberg.
If the payment is not successful, the country will slip to the brink of insolvency. According to the BBC, no similar situation has been seen since Boris Yeltsin end of the term of office. At that time, the country was derailed by the economic crisis, which led to the collapse of several Russian banks in August 1998.
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It’s about there is no reluctance, as the Kremlin has stated that Russia wants to pay its debts. Russia would also be able to afford the payments due to its abundant oil and gas revenues.
However, sanctions on the country make it more difficult to settle the payment.
Russia has been on the verge of insolvency since the United States tightened sanctions on the country and prevented its banks from receiving payments from Russia at the end of May. In the United States, there was a special permit valid until May 25 that allowed interest payments and repayments related to the debt to be received.
In addition, the European Union in early June, added securities market participant NSD to the list of sanctions against Russia, which is why Western institutions have not been able to receive payments. Russia has been expected to use the NSD for foreign debt repayments and interest payments.
Among other things, Russia has said it paid $ 100 million in loan interest in May and sent the payment to NSD, which was to pass the payment on to international banks.
Although Russia said it had sent the money to NSD before the US-EU decision, creditors have not According to Bloomberg, so far received their debts.
There is an extra month to pay off the debt, which is coming to an end on Sunday night.
Russian the Treasury minister Anton Siluanov has repeatedly said, according to the Financial Times, that Western countries are trying to force Russia into an “artificial” insolvency. Russia has also been constantly trying to find ways to circumvent sanctions by saying the country would pay its debt in rubles.
According to Reuters, Russia said it had paid other interest on the ruble this week to avoid insolvency.
On Thursday, the country’s finance minister announced that it had transferred about 12.5 billion rubles, or about $ 235 million in interest, to NSD on loans maturing in 2027 and 2047. Russia, on the other hand, said it had paid 8.5 billion rubles ($ 159 million) in interest on Friday. This loan will mature in 2028.
Bloombergin by Russia considers its debt paid when it has transferred the ruble to its local paying agent, NSD. However, the terms of the loans do not allow for payment in rubles.
For now it is unclear how Russia’s insolvency would be established.
Normally, insolvency would be declared by credit rating agencies assessing the creditworthiness of borrowers, but EU sanctions prevent them from dealing with Russia, the BBC says.
Creditors could also themselves declare Russia insolvent and demand immediate repayment of their debts in court.
The insolvency would not necessarily mean anything to Russia immediately, as Russia is already cut off from the international economic system.
For Russia, however, insolvency would be embarrassing to the extent that it would slow the country’s return to the international economic system – if Russia wants to return to it as a full member someday.
Usually, the insolvency of a state means that that state does not get a new loan until new debt terms are agreed. Russia’s insolvency would therefore likely increase its debt service costs.
The insolvency in 1998 was due to loans denominated in Russian rubles. At that time, Russia’s foreign creditors practically did not suffer losses and the claims of foreign creditors were not restructured. Instead, Russia’s internal debt and debt inherited from Soviet Russia were cut.
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