Sign in front of the offices of JP Morgan Chase & Co. seen in New York, USA, March 29, 2021. REUTERS / Brendan McDermid
LONDON, March 2 – Sanctions imposed on Russia have significantly increased the country’s chances of failing to repay its debt in dollars and other international markets, analysts at JPMorgan and others warned on Wednesday.
Russia has over $ 700 million in government bond payments this month. Although in theory there are sufficient reserves to cover the debt, in practice the freezing of some assets and other measures may affect its ability to make payments. Read more
“Sanctioning Russian government structures in the United States, countermeasures in Russia to restrict payments abroad and disrupting payment chains are major obstacles for Russia to make payments on bonds abroad,” JPMorgan said in a note to customers.
“Sanctions … have significantly increased the likelihood of the Russian government’s defaulting on hard currency.
The central bank and the finance ministry did not respond to a Reuters request for comment on the possibility of default.
The first date of the crisis, analysts at JP Morgan said, was March 16, when two bond coupons were paid, although as much of Russia’s debt they have built-in 30-day “grace periods” that would repel any formal moment. default April 15.
Russia has just under $ 40 billion in debt on the international market or “hard currency,” as it is known. Although this is a small amount for an economy important to Russia, any missed payment will trigger a chain of events.
Major credit rating agencies such as S&P Global, Moody’s and Fitch, which had investment grade ratings for Russia until last week, will downgrade it en masse.
JPMorgan estimates that about $ 6 billion in credit default swaps (CDS) that bondholders have purchased as insurance policies will also have to be repaid, although the process could be complicated in the event of further sanctions. long.
Concerns about the failure followed a warning from the Institute of International Finance (IIF) this week, which indicated that approximately half of Russia’s $ 640 billion in foreign exchange reserves had been effectively frozen by international sanctions. Read more
Capital Economics also warned on Wednesday of growing risks of default. It says it will hit mostly international investors – foreigners held $ 20 billion in Russian government debt denominated in dollars and rubles late last year, according to Russia’s central bank – although that would further damage Moscow’s reputation. international markets.
“The likelihood that the government and companies are unable or unwilling to repay foreign debt has increased significantly,” Jackson said.
Report by Mark Jones Edited by Karin Strohecker and Mark Potter
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