Russia's default on external debt: what does it mean and what threatens the country with

Yekaterina Maksimova

Bloomberg Agency over the weekend assumed that Russia would default for the first time since 1918 on issues of sovereign Eurobonds maturing in 2026 ($71.25 million) and 2036 (26.5 million euros) in dollars and euros. On Monday, June 27, the American agency stated that the payment did not go through, the holders did not receive payments, and therefore the default is technically fixed by today's date.

"Russia defaulted on its sovereign foreign-currency debt for the first time in a century, the culmination of ever-tougher Western sanctions that cut off payments to foreign creditors," Bloomberg was quoted as saying by RIA Novosti.

Eurobond holders are mainly the largest Western banks, pension funds, financial institutions and private individuals. Including there are Russian holders who also had the right to buy Russia's national debt. And their assets are now also blocked in the European depository.

As early as June 23, the head of the Ministry of Finance, Anton Siluanov , on the agency's website, spoke in detail about the new - force majeure - scheme for calculating Russia's foreign bonded loans. The minister stressed that Russia is striving to fulfill all its obligations, while we are forced to "pay in the currency that is guaranteed to be available to us - in rubles." And the payment in rubles was sent.

Siluanov last Thursday commented on the threat of default as follows: “ Everyone will still say what he wants. But there are objective things that are easy to check. It is impossible to execute the payment in full accordance with the issuing documentation for reasons beyond our control, or rather, due to the intervention of third parties. This is the first. Second, we made the payment. Thirdly, we will ensure the equivalence of rubles for any day to the volume of dollars and euros that the investor must receive <…>. Therefore, there is no reason to regard such a change in the currency of payment as an improper performance by the Russian Federation of its debt obligations. Especially in force majeure."

Financial analyst, Doctor of Economics Konstantin Selyanin believes that Russia, the debtor, really made every effort to make the payment by June 27, but legally, from the point of view of Western creditors, a default did occur.

“And now creditors have the right, since they have not received a repayment of the debt, to go to court and foreclose on the property of Russia. Any property they can get their hands on. Be it Russian ships, buildings, structures. In my opinion, the plaintiffs will win these courts, because the court will take the position of the creditor, the payment has not been made, the money has not reached the holder. Apparently, the position will be as follows: Russia itself is to blame for the sanctions imposed against it. But I assume this, I cannot, of course, decide for the court. But legally, everything will be on the side of the creditor. This means that there will be these attempts at arrests, confiscations. According to legal logic, this is exactly how this can happen, ”Konstantin Selyanin explained to Novye Izvestia.

In his opinion, such an event will not immediately affect ordinary citizens. Yes, there were many Russian investors in the pool of victims, including individuals holding securities in denominated currencies. Their money is now frozen. But much more serious is the fact that for the whole world Russia has acquired the stigma of an unscrupulous debtor. “No one wants to invest here, create jobs, and the remaining foreign companies will look for a way out. This is already a legal fact - Russia has defaulted,” Selyanin concluded.

LiveJournal author Spydell_finance compared the story of Russia's default on foreign debt with "madhouse tours" because the borrower - Russia - is absolutely solvent.

“The absurdity of the situation is that the excess revenues of the Russian Ministry of Finance for the first 5 months on oil and gas amount to 2.53 trillion rubles - this is 47 billion at the current exchange rate. Russia's external debt on external bond loans is 36.2 billion, about 18 billion from foreign creditors. Russia's gold reserves (gold and foreign exchange reserves - ed.) 582 billion, ”reminds the author of a live magazine dedicated to financial markets. And he notes that the Ministry of Finance “tried to put honestly earned money through all channels,” but creditors refused to take Russian rubles.

And "in all this idiocy, the ultimate goal of the United States eludes." “Actually, what are they trying to achieve, how do they want to scare Russia? Another sanctions, the closure of capital markets, credit ratings, an attempt to submit $ 18 billion for payment at once, from which Russia will be frightened, wince, but still be unable to pay? .

World credit ratings were "relevant in the old paradigm" when it was still about attracting foreign investors to the country's economy. “The threat of expropriation of Russian financial and tangible assets also cannot scare the United States, because Russia has frozen enough foreign assets. Expropriate Russian gold reserves? Then we can nullify the entire volume of shares in free float, which are owned by foreign investors in the amount of more than 10 trillion rubles at current prices. In default, there are no problems at all - it's just wonderful, this is what the "doctor ordered" in the current absurd configuration. The sooner we get rid of this toxic, crazy world, the better, ”says the author of Spydell_finance.

Earlier, President Putin said that the United States and the European Union had effectively defaulted on their obligations to Russia, freezing its foreign exchange reserves.