The IMF says a Russian debt default is no longer ‘improbable’ after banks freeze half of Moscow’s foreign reserves

[Rogue Valley]

The IMF says a Russian debt default is no longer ‘improbable’ after banks freeze half of Moscow’s foreign reserves

IMF Managing Director Kristalina Georgieva.

3.14.22
A Russian sovereign default is no longer an “improbable event”, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Sunday, as economic sanctions prevent the country from tapping into its war chest of foreign reserves and paying down outstanding debt. “Russia has the money to service its debt, but cannot access it," Georgieva said on CBS’s “Face the Nation," as Russia risks defaulting on its debt this week. Russia had built up approximately $640 billion in foreign reserves since it last invaded Ukraine, annexing Crimea in 2014 and suffering a slew of economic sanctions in retaliation. The Russian central bank could have used those reserves to prop up the value of the ruble and salvage its economy this month, after sanctions levied against Russia over its February invasion of Ukraine caused the currency to tank. Yet Russian finance minister Anton Siluanov admitted Sunday on state television that U.S., European and Japanese sanctions means the central bank can no longer access about half of its foreign reserves.

Siluanov said that, so long as sanctions against the country remain in effect, Russia would use rubles to pay back its debt—even if the debt is owed in foreign currency. Russia is scheduled to pay $117 million on two dollar-denominated bonds on Wednesday. If the country doesn’t pay, it has a 30-day grace period to make a payment before it is technically in default. The bond does not allow Russia to pay its obligations in rubles, which means Russia's promise to pay back debts in rubles would still trigger a default. The international finance sector is bracing for such an event, which would mark Russia's first default on debt since 1998, and its first on foreign-held debt since 1917. Fitch downgraded its rating for Russian government bonds to its second-lowest level last week, saying that a Russian debt default was “imminent”. Moody’s and S&P have also downgraded their ratings of Russian bonds to junk status.

Many outstanding sovereign debt loans owed by the Russian Federation must be paid back in hard currencies (Dollars/Euros/Yen/Pound/Franc).

No one wants the now worthless Russian ruble, and attempting to make loan payments with Russian rubles would constitute a sovereign debt default.

 

[Mr Person]

Not improbable? It's been just about certain. It was part of the point: to crush their economy.

 

[phoenix2020]

What are the implications here?

Would creditors sue for access to Russia’s foreign holdings to pay the debt? Otherwise it would be creditors, not Russia, left holding the bag.

 

[HangLow]

The IMF says a Russian debt default is no longer ‘improbable’ after banks freeze half of Moscow’s foreign reserves

IMF Managing Director Kristalina Georgieva.
Many outstanding sovereign debt loans owed by the Russian Federation must be paid back in hard currencies (Dollars/Euros/Yen/Pound/Franc).

No one wants the now worthless Russian ruble, and attempting to make loan payments with Russian rubles would constitute a sovereign debt default.

​

 

[Checkerboard Strangler]

Not improbable? It's been just about certain. It was part of the point: to crush their economy.

We still aren't crushing hard enough.

 

[Checkerboard Strangler]

View attachment 67380366​

Western companies are going to have a lot more to worry about than getting back a few airplanes if Putin is calling the shots on the world stage 90 days from now.

 

[HangLow]

Western companies are going to have a lot more to worry about than getting back a few airplanes if Putin is calling the shots on the world stage 90 days from now.

Putin will not be calling anything in the next thirty days...
He is barely calling his girlfriend now... and firing everybody else...
Ukraine is about to flush that turd...
-peace

​

 

[Mr Person]

We still aren't crushing hard enough.

Which "we"?

European countries not doing a complete ban on energy imports?

 

[Mr Person]

We still aren't crushing hard enough.

Which "we"?

European countries not doing a complete ban on energy imports?

To be clear, we probably could shove them further, but it would take something like offering to cover the costs of the most energy-vulnerable countries if they do that or ....well...something. Parts of Europe are going to have massive problems if they simply drop Russian fossil fuels, which is another argument on another subject....but...

I mean, we're all pretty united in action thus far. I'm not sure how much we can cause to happen, at least without more national unity on this.

 

[Checkerboard Strangler]

To be clear, we probably could shove them further, but it would take something like offering to cover the costs of the most energy-vulnerable countries if they do that or ....well...something. Parts of Europe are going to have massive problems if they simply drop Russian fossil fuels, which is another argument on another subject....but...

I mean, we're all pretty united in action thus far. I'm not sure how much we can cause to happen, at least without more national unity on this.

Global unity.
Russia is serving shit sandwiches.
Sorry bout the menu, but it's rather obvious that everyone's going to have to take a bite.

Including us, the Yanks...

"Knock it off Jules, when you pulled into my driveway, did you see a sign that said Dead Russian Soldier Storage?"

 

[beerftw]

What are the implications here?

Would creditors sue for access to Russia’s foreign holdings to pay the debt? Otherwise it would be creditors, not Russia, left holding the bag.

Not too much, likely russia will ignore western debts in dollars, as these countries siezed russian foreign reserves, which is legally theft, but demands russia return all foreign assets in russia to the west plus pay debts.

What is happening here would be like me having my atv stored in your garage while I was borrowing your power tools, but then you deciding to sieze my atv because you did not like how I keep my yard but still demanding the power tools back.

To the russians siezing foreign assets they held is considered theft, so as far as they are concerned all of their debts were taken by the debtor nations anyways. Russia only has 40 billion or so between public and private debt in usd and euros, their foreign debt is actually very tiny.

Also when you block almost any usd and euros from reaching russia, while siezing dollars and euros in foreign banks, but still demand loan repayment in the money they blocked you from, it was a guarantee a default was the point, russia has the money to repay those loans, but it is unlikely they will, as wars have been started over far less, and should the us threaten china too much with sanctions over supporting russia, china may go full in on economic war which may in turn force a default on us wand eu foreign debt to china, or even worse an entire ending of trade relations between the east and west causing epic economic depressions worldwide.