As the deadline for paying $100 million in interest to debt holders approaches, Russia is getting closer hypothetical This Sunday, in what, if confirmed, would be the first debt default in more than a hundred years.
In question is the payment of about $100 million (approximately €95 million, at the current exchange rate) in interest, which should have been Done by May 27. In the absence of that deadline, Russia had a grace period of 30 days, ending on Sunday.
The Russian government guarantees that payment has been made, and therefore assures that the obligation will have been fulfilled. However, Russia was a target international sanctions Since it invaded Ukraine, including financial sanctions that effectively excluded the country from the global financial system, blocking the movement of money. Thus, it is unlikely, even if transferred, that the amount in question will reach the recipients, which will lead to Russia in default.
This is not a surprising result. “Since March, we thought that a hypothetical From Russia it was probably inevitable. A lawyer who specializes in sovereign debt litigation told Reuters the question was only when. The question, adds the lawyer himself, was finally answered, at the end of May, two days before the relevant payment deadline, the US Treasury decided to put an end to the gap in penalties that, until this is done. still allowed Russia pays off its debts in dollars for American investors.
The practical effect of defaulting on debt will be reduced. Under normal circumstances, Russia would find it difficult to turn to the markets, but at the moment this is a source of financing that it cannot even turn to because of the sanctions it is subject to. At the same time, the country has large cash reserves, as a result of oil and natural gas revenues, and therefore the direct impact on the population will also be minimized, at least initially.
The effect will be mostly felt in the future, when Russia will return to financing itself in international markets, such as hypothetical It will likely lead to an increase in financing costs. In addition to this, you also have to count on the long operations that you will have to do when entering the default mode. When Russia last failed to pay its debts in 1918, it was not able to reach an agreement with its creditors until 1998.
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