Russia defaults on foreign debt for first time in a century

• Image Credit: Internet

• Jun 27, 2022 | Kabir Chakraborty

While Russia has been finding ways to avoid the sanctions imposed as a result of the invasion of Ukraine for months, it missed the deadline on Sunday night to comply with a 30-day grace period on interest payments that were initially due on May 27.

Digital
Desk: Russian defaulted on its foreign-currency sovereign debt for the first
time in more than a century as a result of sanctions imposed by the West over
its involvement in the Ukraine War, further alienating it from the global
financial system. The Kremlin has resisted being designated as in default,
claiming that the West's closure of its payment channels to foreign creditors
has forced it into non-payment even though it has the resources to do so.

Russian
Finance Minister Anton Siluanov stated last month that "there is money and
there is also the readiness to pay." The quality of life for Russians
won't be impacted by this fake crisis that a hostile nation has created.

While
Russia has been finding ways to avoid the sanctions imposed as a result of the
invasion of Ukraine for months, it missed the deadline on Sunday night to
comply with a 30-day grace period on interest payments that were initially due
on May 27.

Here's all you need to know about the debt default:

·        
About
half of the $40 billion in foreign bonds that Russia owes to foreigners. A
large portion of its gold and foreign currency holdings were kept abroad and
are currently frozen.

·        
When
the Russian Empire fell and the Soviet Union was founded after the Bolshevik
Revolution, Russia last defaulted on its international debt.

·        
During
the financial crisis and currency collapse of 1998, Russia went into default on
$40 billion of its domestic loans. but with the aid of foreign assistance was
able to recover from that default.

·        
Rating
companies would typically issue a formal statement of default, but because of
the European sanctions, they have stopped rating Russian entities. If the
holders of 25% of the outstanding bonds concur that a "Event of
Default" has taken place, the bondholders may now act on their own.

·        
Analysts
are cautiously predicting that the failure would not have the same kind of
impact on international financial markets and institutions as did an earlier
default in 1998, according to the Associated Press.