The United States has decided to end, at 12:01 am Wednesday Washington time, an exemption allowing Moscow to pay its debts in dollars, the U.S. Treasury announced Tuesday, a decision that could spur Russia in default of payment.
This measure will take effect two days before the next payment deadline for Moscow, which only covers more than $ 100 million in interest on the two bonds.
According to wall street journal cited Russia’s official news agency Tass, however authorities have already paid the interest.
Aside from the May 27 deadline, the Russian government still has to honor 12 payments by the end of the year. Failure to pay therefore seems inevitable.
In the area since the beginning of Western sanctions against Russia, in retaliation for the invasion of Ukraine launched on February 24, this exemption has until then allowed Moscow to flee them.
Washington agreed to a temporary exemption for enable a smooth transition and enable investors to sell their securitiesexplanation by U.S. Treasury Secretary Janet Yellen last week.
He then indicated that this exemption would take most likely late Wednesday.
Since the beginning of April, Russia has been unable to repay its debt using dollars held in American banks.
Russian Central Bank Governor Elvira Nabiullina admitted in late April that Moscow faced difficulty in paymentbut he refused to speak about non -payment.
Russia’s external debt represents, according to its Ministry of Finance, approximately 4500 to 4700 billion rubles (one hundred billion Canadian dollars at current rates), or 20% of total public debt.
There has been no debt default abroad since 1918
Russia failed to repay its domestic debts in rubles during the 1998 financial crisis, but has not defaulted on its foreign debt since 1918, when Bolshevik leader Vladimir Lenin refused to recognize inherited debt. from the tsarist regime. which was overthrown in the revolution of 1917.
In the event of a default, the Russian government will lose access to an important source of financing or be forced to pay prohibited interest rates even though, in fact, it will no longer be able to raise funds due to Western sanctions.
For their part, holders of unpaid debts risk losing all or part of their money.
There could also be a legal battle because Russia’s Finance Minister Anton Silouanov indicated in April that Russia would initiate proceedings if it was declared by the West as default.
He then accused the Western nations of creation artificial the conditions of a default payment.
Like all states, Russia borrows money in the form of bonds, usually in dollars, and must regularly pay interest and pay capital.
A country is considered in default when it is unable to fulfill its promises to its creditors.
Source: Radio-Canada
