Unknown to the general public, even a little secret, this council called the CDDC (Credit Derivatives Determinations Committee) organizes these auctions, the objective of which is to compensate investors who have taken out insurance against the default of payment by Russia, "Credit Default Swaps" or CDS.

This triggering acknowledges Russia's payment default, which was never officially announced but was taken for granted by most economic actors even in the absence of the rating agencies' assessment prohibited by Western sanctions. .

This is Moscow's first default on its foreign debt since 1918 and the episode of Russian loans launched by Tsarist Russia on Western markets, particularly in France, which the Bolshevik leader Lenin had refused to recognize.

In fact, not much has changed: Russia has been cut off from international capital markets anyway since its invasion of Ukraine at the end of February.

Moreover, Moscow has little foreign currency debt, its external debt weighing around $40 billion.

Its public debt is also close to only 20% of its GDP.

At the same time, its cash inflows from hydrocarbon sales have been massive since the start of the year under the effect of soaring prices.

However, this did not prevent the Kremlin from rebelling for months against a default which it describes as "illegitimate" because precipitated by the sanctions.

$2.37 billion

Technically, the auction operation on the Russian debt must be carried out in two stages.

The first stage is intended to set an initial price for eight bonds auctioned, while the second stage, open more widely to investors, must be based on the first stage to set a final price for the bonds.

"The final price of these auctions will determine the amount of recovery on the CDS", explains the American bank JPMorgan in a recent note which evaluates all of these insurances against the Russian default at 2.37 billion dollars.

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This auction operation is usual in cases of payment defaults, with the difference that the delays were exceptionally long in the Russian case, creating a blur of several weeks as to the compensation of investors.

From the moment the board of creditors acknowledged that Russia had failed to pay a repayment term, called a "credit event" in its jargon, to the organization of the auction on Monday, more than three months against around 30 days in normal times, according to a CDS expert interviewed recently by AFP.

This long latency is explained by the freezing of the Russian financial system under the effect of sanctions: international investors no longer have the right since the spring to exchange Russian securities, yet the auction system precisely imposes trade in these securities.

In order to facilitate the organization of these auctions, the American authorities exceptionally authorized transactions on the eight Russian bonds denominated in foreign currencies between 8 and 22 September.

According to JPMorgan, the attractiveness of Russian debt for investors at the end of these auctions is made very uncertain by the impossibility of exchanging financial products from this country for months.

Uncertainty also hangs over the exact date on which the investor compensation process will come to an end.

The London-based CDDC's Europe/Middle East/Africa (EMEA) arm, which organizes the auction, has claimed in recent days that the days off due to Queen Elizabeth's funeral could slightly delay the whole process. .

© 2022 AFP