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Why Russia risks default and what happens if Moscow does not pay its debts

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Russia aftermilitary operation In Ukraine, it will be in serious economic difficulty. Agency Fitchin fact, the shortening of Moscow, that is, the possibility that the country is led by put it in Fail to meet the debt, it will be “imminent”. So it is no longer a hypothesis but a concrete possibility. On the other hand, however, the analysis of algebra He explains that thanks to the sale of raw materials at current prices, Russia should be able to bypass sanctions unscathed. But what happens when a country defaults, and thus when it is not able to repay its debt in terms of interest payments and/or principal repayments?

risk of failure

The explain This morning Republic According to any negotiations with bondholders should begin at that point to restructure the debt. It is unfortunate that in the current situation, it seems difficult, if not impossible, for the parties to reach an agreement that satisfies all. Indeed, Moscow suffers not so much from a lack of resources as from sanctions from the West. What hurts Russia the most is its freezing 640 billion dollars of international reserves in foreign currency. that of April 15 It could be an important date for Putin: only in the middle of next month, when 30 days A pardon in which the interest on the bond will be paid in a lump sum 117 million dollarswe will really understand the economic conditions in Russia.

Consequences of default

But what happens if the state defaults? In addition to reputational consequences, it risks being excluded from capital markets in the face of – in the case of Russia – about 40 billion dollars of sovereign bonds internationally without considering debt in Russian corporate bonds amounting to more than 200 billion dollars. A problem, therefore, it will also have repercussions for large groups with public participation such as gas and oil giants Gazprom And the Rosneft. On the other hand, it is impossible to predict the effect that Russian insolvency could have on stock exchanges (considering that in this case, there would not even be solidarity from central banks, such as explain Newspaper). The last hypothetical history of Moscow dates back to 1998 With then-President Boris Yeltsin. Meanwhile, the only counter-step taken by President Putin was to authorize by decree with distinction Pay In Russian rubles (significantly reduced) creditors of countries committed in hostile activities. Among them, in fact, Italy and the entire European Union.

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Archive cover photo: EPA / ALEKSEY NIKOLSKYI / SPUTNIK

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