Economic sanctions: Russia prepares for default
The ruble has lost 70% of its value since the start of the conflict in Ukraine.
REUTERS/Ilya Naymushin
Text by: RFI Follow
1 min
According to rating agencies, Russia is close to defaulting.
This Monday the Russian Minister of Finance believes that this situation has been artificially created by foreign countries and their financial sanctions against the country.
Western sanctions have crippled part of Russia's banking and financial system, frozen a significant portion of the country's currency reserves, and caused a collapse of the rouble.
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During March and April, Russia has to face several deadlines, the first will be this Wednesday.
On March 16, the country is due to pay $117 million in bonds.
Russia now has ample means to repay.
Its stock of foreign currency and gold is substantial.
The question is: does she really want to pay her debts?
Because Vladimir Putin signed a decree authorizing the repayment of debts to “hostile countries” in ruble.
The logic is quite simple, as the saying goes: money is the sinews of war and the head of the Kremlin wants to limit the outflow of foreign currencies to finance the war effort.
This reimbursement in ruble is to Russia's advantage since the Russian currency has lost more than 70% of its value since January.
But that already puts the country technically in default.
Russia is low in debt, the public debt currently represents only 19% of Russian GDP and even if this payment default is artificial, in the long term it is Russia that will be penalized.
Failure to pay would scare off potential creditors, cut the country off from financial markets and cause uncontrollable inflation.
►Also read: Why Russia considers itself invulnerable to sanctions
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Russia
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