Elvira Nabiullina, Head of the Central Bank of the Russian Federation, and Maxim Oreshkin, Assistant to the President, at a meeting in Moscow, February 28, 2022 ALEXEY NIKOLSKY / SPUTNIK VIA AFP
All day Wednesday, March 16, creditors waited, and there was a real tension. Will Russia again be in default after 1918 and 1998? The Russian government was to pay $117 million (€106 million) in interest on the two bonds. Was he going to do it? Shortly after lunch, Russian Finance Minister Anton Siluanov added to the confusion: he promised that the payment was “on the way,” but due to US sanctions, “money [n’était] hasn’t passed yet.”
The smoke screen, in the end, was not enough to hide the main thing. As a result, according to our information, the creditors never received the money. De facto, the Russian Federation does not comply with the maturity date. “Vladimir Putin’s regime is becoming a rotten borrower [“rogue borrower”] “Said Maximilian Hess, a sovereign debt specialist at the Foreign Policy Research Institute, a US think tank.
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Moscow technically has a thirty-day grace period to catch up. Thus, the rating agencies will only default on April 15 if no payment is made by then.
But there is a symbol: the Russian state, on its knees after economic sanctions, could not or did not want to pay off its debt. It ranks with Belize or Suriname, the last two countries to default. For Russia, this is a throwback to 1918, when it last defaulted on a foreign currency loan. In 1998, facing a severe economic crisis, the country defaulted on its ruble bonds and then imposed a moratorium on foreign currency borrowing.
Non-payments with creditors, a kind of counter-sanction
“This is the first step on a 30-day road to ruin,” continues Mr. Hess. The precedents are not good for countries that miss maturities, but the situation is relatively unique. »
Unique because this payment default is unlike those experienced by other countries. “This is the choice of the Russian state,” Sergei Guriev, a former economic adviser to the Russian government and a refugee in France since 2012, explained on March 10. The central bank is frozen, Moscow indeed continues to sell its oil and gas at the rate of about $700 million a day. It would be possible to dip into these sums, especially for a minor payment of $117 million.
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