The United States will block the last resort for Russia to repay its billions in debt to international investors on Wednesday, making Russia’s default on its debt for the first time since the Bolshevik revolution almost inevitable.
The Ministry of Finance said in a statement that it does not intend to renew the license to allow Russia to continue paying its debtors through US banks.
Since the first rounds of sanctions, the Ministry of Finance has granted banks permission to process all bond payments from Russia. That window expires at midnight on May 25th.
There had already been signs that the Biden administration was not ready to extend the deadline. Finance Minister Janet Yellen told a news conference heading into a group of seventh finance ministers in Koenigswinter, Germany, last week that the window was in place “to allow time for a systematic transition and for investors to be able to sell securities.”
“The expectation was that this would be temporary,” Yellen said.
Without permission to use US banks to pay off their debts, Russia would have no ability to repay its international bond investors. The Kremlin has used JPMorgan Chase and Citigroup as a means of repaying its obligations.
Jay Auslander, a prominent government debt lawyer who previously sued for other debt crises such as the one in Argentina, said at the time that most institutional investors in Russian debt had probably sold their assets, knowing that the deadline was running out. Those who still have the debt are either forced debt investors or those who are willing to wait to sue in the coming years.
“The majority who wanted to get out got out. The only issue is finding buyers,” he said.
The Kremlin seems to have foreseen the likelihood that the United States would not allow Russia to continue paying off its bonds. The Russian Ministry of Finance prepaid two bonds on Friday that were due this month to get ahead of the May 25 deadline.
The next payments that Russia will have to pay on its debt are due on June 23. Like other Russian debts, these bonds have a 30-day deadline – which would cause Russia to declare arrears at the end of July, with the exception of the unlikely scenario that the war between Russia and Ukraine would end before then.
Investors have been almost certain that Russia will go bankrupt for months now. Insurance contracts that cover Russia’s debt have priced an 80% chance of default for weeks, and rating agencies such as Standard & Poor’s and Moody’s have put the country’s debt deep in the rubbish dump.
Russia has not been able to repay its international debts since the Revolution of 1917, when the Russian Empire collapsed and the Soviet Union came into being. Russia repaid its domestic debt in the late 1990s during the Asian financial crisis, but managed to recover with the help of international aid.
The United States is abandoning Russia’s ability to pay international investors
Source link The United States is abandoning Russia’s ability to pay international investors