Russia says it made a payment to avoid default

[NWRatCon]

Russia says it made a payment to avoid default (CNN)​

"Russia says it has ordered the $117 million in interest payments it owes Wednesday to be sent to investors, attempting to avoid its first international default in more than a century. But it's not out of the woods yet.

That's because the funds the country used to make the debt payments came from Russia's frozen foreign assets, sanctioned because of its attack on Ukraine — so it remains unclear whether investors will receive their money.

Anton Siluanov, Russia's finance minister, told state media Russia Today that the country had made good on its obligations to creditors. But the "possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us," Siluanov said, according to RT, warning that the payment might not go through if the United States disallows it." (Emphasis mine)

In other words, they used a bad check to pay the debt.

 

[Rogue Valley]

The Kremlin was forced to use dollars here because the two debt installment payments stipulated payment in dollars. If Russia paid in rubles, that would constitute a technical default. There is an automatic 30 day grace period for these two payments, so we'll have to see if they are processed correctly.

Russia has a different payment coming in April. Many Russian loans can be paid back using rubles no matter the original tender. Always read the fine print.

Yesterday the exchange rate was 118 rubles to the dollar, so a Russian ruble is now worth less than a penny.

The Central Bank may have to devalue the ruble and put price-controls in place. The interest rate is already 20%. The Russian economy is screwed.

 

[NWRatCon]

The denouement of this circumstance is going to have interesting, and lasting, effects. I agree with the assessment that the Russian economy is screwed. Payments in dollars are getting out of their reach (as are their assets) and payments in rubles are unlikely to be acceptable much longer. They won't get many more loans, and without those, they have no liquidity to function. Russia may succeed in Ukraine, but it will, ultimately, fail.

 

[bluesmoke]

Wait'll to avoid default the oligarchs have to kick-in. Heh-heh.

 

[Rogue Valley]

US Treasury to allow Russia's $117 million bond payment to go through in dollars

 

[NWRatCon]

US Treasury to allow Russia's $117 million bond payment to go through in dollars

I understand why treasury did this. They may be frozen assets, but this reduces that resource by 25% and protects non-Russian buyers (bond holders) at the same time. It's like winding down the affairs of a bankrupt.