Sunday, June 26, Russia was probably to go into default. Historically, the moment is significant, since it is a first since the great crisis of 1998. But the effect should be very limited. “It is unlikely that the economic impact will be major”believes Joseph Marlow, of Capital Economics, a research firm.
Since the start of the invasion of Ukraine on February 24, the Russian government has already been largely cut off from the international financial system, as a result of Western sanctions. “A declaration of default would be a symbolic event, but the Russian government has already lost the ability to issue debt in dollars”recalls Takahide Kiuchi, economist at the Nomura Research Institute.
The process towards a default began on May 27, when Moscow missed a repayment deadline of 100 million dollars (about 94.7 million euros) on a bond. The countdown to the thirty-day grace period then began, expiring on June 26. The Russian government says it has the money and wants to pay, but is stuck because of the sanctions. To show his goodwill, he paid the sum in rubles to the National Settlement Depository, a Russian organization through which the money must pass. As this is on the sanctions list, the transfer to Western creditors is blocked.
strange situation
Moscow therefore lays the blame on Western countries: “Everything indicates that by artificially blocking the Russian Federation from servicing its foreign debt, the objective is to affix the label of ‘default’ to us., explains Anton Silouanov, the Minister of Finance. You can declare whatever you want (…), but those who understand the situation know that this is not a fault. »
This strange situation is a reminder that, despite particularly heavy sanctions, Russia has succeeded in stabilizing its financial system and its economy. Four months after the start of the war, “Russia has a lot of cash that it can’t spend”notes even Elina Ribakova, economist at the Institute of International Finance (IIF), an American association representing the finance industry.
At the start of the invasion, the central bank doubled its interest rate to 20% and imposed severe capital controls. The interest rate has now returned to 9.5%, its pre-war level. Gradually, capital can circulate more freely. Russian companies that export no longer have to convert their foreign currency into rubles, as was the case at the start of the conflict.
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