From Investing:
“Russia pays dollar-bonds in
roubles as it seeks to avoid default”
Russia's finance ministry said on
Thursday it had fulfilled obligations on two dollar-denominated Eurobonds
"in full" by sending interest payments in roubles to its National
Settlement Depository, in its latest bid to avoid a sovereign default. Russia
has been struggling to make payments on its $40 billion of international bonds
since being hit with sweeping sanctions over its Feb. 24 invasion of Ukraine. The
latest payments amounting to 12.51 billion roubles ($234.5 million) were due on
two Eurobonds maturing in 2027 and 2047 , whose terms do not allow for payments
in Russia's currency. "Obligations on servicing the state securities of
the Russian Federation were fulfilled by the finance ministry in full,"
the ministry said in a statement.
Both dollar-denominated bonds
have in their terms provisions that payments could be made under certain
circumstances in euros, pounds sterling or Swiss francs. However, they do not
foresee payments in roubles, the currency Moscow used in the latest transfer.
Both issues also have a 30-day grace period on payments. To avert default,
funds broadly have to be paid in the correct currency into bondholders'
accounts within the prescribed timeframe.
The latest money transfers to the
National Settlement Depository (NSD) come after President Vladimir Putin signed
a decree on Wednesday to establish temporary procedures aimed at fulfilling
Russia's foreign debt obligations. The ministry said it was transitioning to
the procedure established by the decree, and funds will be disbursed in roubles
to the NSD before reaching bondholders in stages, depending on the amount of
sanctions.
While Eurobond holders whose
ownership rights are contained within the country's financial system will be
paid in roubles, the holdings of investors to whom funds cannot be transferred
due to sanctions imposed on Moscow will need to open a rouble account in the
NSD to receive those funds. It is unclear as yet whether foreign investors -
many of whom will have to navigate sanctions imposed by their own governments -
will be willing or even permitted to open such accounts. But the wider process
is beset with legal and commercial uncertainties, according to lawyers and
analysts. "It's still unclear whether the paying agent of Russia bonds
works for the government or the creditors," said Mitu Gulati, a law
professor at the University of Virginia and an expert on debt restructurings. "The
Russian lawyers put so many landmines in a contract, and it's not even clear in
which jurisdiction a creditor could potentially sue the country," he said.
Russia has been on the brink of
default since the U.S. Treasury decided in May against extending a key license
that had allowed Moscow to keep paying bondholders despite the sanctions. A
30-day grace period on interest payments worth $71.25 million and 26.5 million
euros that were due May 27 expires on Monday. While Russia decided to send the
money to the payment agent NSD before the U.S. Treasury's decision, it is
unclear whether the money made it further into bondholders' accounts.
^ Clearly paying the loans in
Russian Rubles instead of the allowed US Dollars (or Euros, Pounds or Francs)
will mean that Russia will not have fulfilled its loan agreement and will be in
Default.
It will be the first time since 1918
that Russia will have Defaulted on an International Loan (it Defaulted on Internal
Loans in 1998.) In 1918 the Russian Communists Defaulted by openly refusing to
pay Czarist Russian International Loans (Note: from 1917-1922 there was no
Soviet Union only the Russian Soviet Federated Socialist Republic. In 1922 the
RSFSR joined with Ukraine, Belarus and Transcaucasia of Armenia, Azerbaijan and
Georgia to create the USSR.)
The 1918 Default was one of the
reasons the US didn't recognize the USSR until 1933 (the other being a
Communist Country.) The US made the USSR paying the Defaulted Loans as well as
all Fines and Penalties - which were a
lot 15 years later - a key element to establishing Diplomatic Relations - which
the USSR eventually had to do.
That means that Russia, not the
Soviet Union, Defaulted back in 1918 so it will be the 2nd time in
Russia’s History that it will Default.
Putin and his Nazi Zs have so far
been able to prop-up the Russian Economy from the real effects of the
International Sanctions placed on them for their murder, rape, torture and
other War Crimes in Ukraine, but an International Default will ruin Russia’s Economy
and Political Prestige for decades.
It will also hurt every single Russian
citizen (those outside of Russia and those inside Russia) and they will finally
start to feel the strain of their support for the Nazi Zs directly where it
will hurt them the most: their food, their gas, their medicines, their everyday
basics along with every other item. Even those hardened from years of
Government-Imposed Consumer Shortages during Soviet Times will never have experienced
what this current Default will impose on them.
The Grace Period ends this Monday
and I don’t see Russia paying in any of the approved currencies (US Dollars,
Euros, British Pounds or Swiss Francs.) Fingers crossed that Monday comes and
goes and Russia will be in an International Default.
The sooner Russia loses its
access to money the sooner their Genocide of Men, Women and Children in Ukraine
will end. ^
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