The countries of the European Union, Australia, the United Kingdom, Canada, Monaco, South Korea, the United States, Switzerland and Japan are concerned. The currency has lost 45% of its value since January.
Faced with the violent financial crisis that has hit Russia since the deployment of Western sanctions, Vladimir Putin is trying to find a way out. To avoid the specter of default, he offers debtors to repay their debts to foreign institutions in rubles.
A decree to this effect was adopted this weekend. It targets in particular the countries “engaged in hostile activities” towards Russia, namely those who have adopted these sanctions against it: United States, European Union, United Kingdom, Switzerland, Australia, Canada, South Korea and Japan.
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In practice, the debtor can ask a Russian bank to create a special account in rubles in the name of his foreign creditor and send him a payment in rubles equivalent, at the Central Bank’s daily rate. However, since January, the Russian currency has lost 45% of its value against the dollar. Moscow has already banned foreign payments with capital controls.
The Kremlin’s financial sleight of hand is a first response to international sanctions. Others may follow soon.
The first effect of this measure was that Russian bonds in foreign denominations collapsed. The listing of certificates insuring Russian debt now implies an 80% probability of default. This weekend, the rating agency Moody’s further downgraded Russian debt to speculative grade. Next week, Moscow will face a $117 million deadline to repay, which will not benefit from the possibility of being converted into rubles.