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Russia getting closer to first major debt default in more than a century after failing to pay $ 1.9 million in interest

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The Committee on Credit Derivatives of the EMEA (CDDC) stated on its website that the committee had voted “yes” to a question to determine whether there had been a “credit default event” for Russia. .

Russia’s 2022 international bond issue matured on April 4, and the payment of principal and interest due on maturity was not made until May 2.

Foreign holders of those Russian sovereign bonds demanded a decision on whether the $ 1.9 million interest accrued at the time, which was not included in the payment, was a “credit event” that could allow them to collect a loan. payment for non-payment insurance, known as default credit swaps.

The commission said it would continue to discuss the issue on Monday (June 6th).

A breach of Russia’s debt obligations seems inevitable, according to some investors, after the US Treasury decided at the end of May not to extend a license that allowed creditors to receive payments from Russia, despite financial sanctions.

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Russia has outstanding international bonds of about $ 40 billion and payments due by the end of the year of just under $ 2 billion.

Major sanctions imposed by Western countries and their allies on Russia following the February 24 invasion of Ukraine, as well as countermeasures by Moscow, have almost excluded the country from the global financial system.

Russian Finance Minister Anton Siluanov said on May 18 that Moscow would pay off its foreign debt obligations in rubles if the United States blocked other options, and would not declare default because it had the means to pay.

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However, not all bonds allow payment in rubles.

The country said it could expand a scheme used to pay for its gas and holders of sovereign bonds, allowing eurobond investors to open Russian currency and ruble accounts.

The money would be channeled through Russia’s National Regulatory Depository (NSD), which is not subject to Western sanctions.

Prior to the invasion of Ukraine, Russia had available gold and foreign exchange reserves of nearly $ 650 billion, compared to its $ 40 billion foreign debt. Russia also earns billions of dollars a week by selling oil and gas.

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