Accumulating further pressure on the besieged government of Vladimir Putin, Moody’s said that without a return before May 4 to make dollar payments as agreed on the terms of Russia’s loans, Moscow could default, allowing creditors to default. claim insurance payments and tarnishing the country’s reputation as a credible counterparty. Moody’s warning of imminent bankruptcy is expected to be met with an angry response from the Putin administration, which has denied that its lending rules prevent Russia from paying interest in rubles. In response to a similar statement last week by Standard & Poor’s that ruble payments were jeopardizing Russia’s status as a borrower, the Kremlin said the West had already defaulted by freezing its reserves and wanted a new system. to replace Bretton. Woods’s economic architecture was founded by Western powers in 1944. Sanctions in Russia since its invasion of Ukraine have prevented the Russian central bank from gaining access to much of the foreign currency it has amassed in recent years. Earlier this week, Anton Siluanov told the Kremlin-backed Izvestia newspaper that Russia had taken “all necessary measures” to pay its international creditors. Russia’s finance minister has suggested that she could go to court to claim that her repayment terms had been met. “Of course we will sue, because we have taken all the necessary measures to ensure that investors receive their payments,” he said. If Moscow declares default, it will mark Russia’s first failure to pay interest on foreign bonds since the 1998 currency crisis, when investor confidence collapsed and the Boris Yeltsin government failed to sell new bonds to international markets. old . Last week, Russia had to meet two payment deadlines for bonds it had previously sold to foreign investors. The combined interest was worth nearly $ 650 million and Russia was supposed to have made the payments in dollars, under the terms of the bonds. It is understood that one of Russia’s largest lenders has asked the Credit Derivatives Commission, a division of a private lending body, to judge whether there has been a “possible default” in relation to Russia. ties. Russia still has 18 days of a 30-day grace period before the commission can rule that a “credit incident” had occurred – a default. Moody’s said: “Russia has reportedly made payments on two bonds maturing in 2022 and 2042 in rubles instead of US dollars, which represents a change in the terms of payment compared to the original bond contracts and can therefore be considered default according to Moody’s definition if left untreated by May 4, which is the end of the grace period. “Bond contracts have no provision for repayment in any currency other than dollars,” he added. In 1998, Russia forced lenders to wait 90 days before making interest-bearing payments, leading to technical bankruptcy. Desperate to keep the flow of imports, but without the foreign currency paying for them, the Kremlin has resorted to an exchange system with foreign companies and governments, which some analysts believe is currently being used as a way to circumvent sanctions. Subscribe to the daily Business Today email or follow the Guardian Business on Twitter at @BusinessDesk The country was saved by the rise in the price of oil that produced billions of dollars in foreign currency. By the end of 1998 the economy had begun to recover and the government was able to repay the debt again. Foreign creditors worry that the freezing of Russian assets in dollars and euros under the current sanctions regime means that a similar recovery and return on foreign currency interest payments will be seen beyond the Kremlin this time around. If Russia misses its debt maturity, lenders who have secured their loans using credit default swaps will be able to claim insurance payments.
