Russia debt repayments
By Jeff Kouba
Russia is spending a fortune in Ukraine, perhaps as much as $20 billion a day. In turn though, Europe is sending hundreds of millions of euros a day to Russia for hydrocarbons. Putting sanctions on Russia while funding Russia is not a comfortable position. So, the EU is contemplating phasing out its dependence on Russian, and that might have enormous implications for Russia’s economy.
Maximilian Hess of the Foreign Policy Research Institute looks at some of those implications:
On April 29, Russia’s finance ministry announced that it would pay some $650m to foreign creditors on two overdue Eurobonds. And by making the payments before the bonds’ grace period expired on May 4, the Kremlin has avoided falling into sovereign default.
Ahead of the bond’s formal maturity on April 4, the Kremlin announced that it would buy back the bonds in roubles – and pay those who refused to accept the rouble buy-back as well. Nearly 75 percent of bondholders (almost certainly all domestic) agreed to the new terms .
Russia’s recent decision to pay the bonds in foreign currency enabled it to avoid the all-but-guaranteed acceleration of other debts and lawsuits that would have followed a default and further impoverished the Russian people.
However, the move also left the Kremlin in a position of extreme hypocrisy and embarrassment. In the end, what Putin did was to repay domestic bondholders with roubles, which they cannot convert freely into hard currency to spend abroad. And pay foreign holders in full, in dollars – hardly a feat worthy of praise.
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In case there is any doubt just how exposed the shipping sector is to Western sanctions, one just needs to look to the actions of Russian state-owned shipping company Sovcomflot. On May 3 specialist maritime industry publication Lloyd’s List revealed that Sovcomflot was looking to sell at least 40 ships from its 121 ship fleet before wind-down authorisations expire and it becomes fully sanctioned on May 15.If Sovcomflot fails to raise enough cash to honour its debts before then, it will fall into default and creditors will go after its ships. Just like the Russian state, Russian businesses are still fearful of defaulting on Western creditors – even amid a war.
May 5th, 2022 at 12:06 pm
So, the EU is contemplating phasing out its dependence on Russian [hydrocarbons]
Good thing those tests over the past couple years to determine just how compliant the Euro citizenry is to whatever dumb shit your betters think you should do have been so successful.
In Denmark they’re promising inflation and less money to their own seniors and more wind turbines (because the German experiment was so successful) as they send more money and war-toys to Ukraine. I don’t expect much push back; Danes are very much into being governed as hard as possible.
May 5th, 2022 at 12:12 pm
Maximilian Hess of the Foreign Policy Research Institute looks at some of those implications:
Waiting with baited breath for the Institute of any kind to opine on implications of Eu not buying Russian hydrocarbons AND consequences of being forced to pay for these hydrocarbons in rubles, replacing petrodollar. The logic basis in that article is flawed from the start since it does not take into account for West paying for Russian hydrocarbons in rubles because it changes the narrative. All propaganda, all the time. From all sides. And some drink it, unquestionably.
May 5th, 2022 at 1:31 pm
Video being released of Ukranian military setting up anti-personnel mines. APM’s are banned….wonder where they got those M18’s?
May 5th, 2022 at 2:09 pm
With an assist from Xi in Beijing, Putin has guaranteed a failed, hermit kingdom future for Russia that is slightly less optimistic than that of North Korea.
The number of uninvestable hermit kingdoms is increasing.
North Korea
Iran
Myanmar
Russia
Belarus
Afghanistan
They should get together to form a free trade zone….
May 5th, 2022 at 2:34 pm
If the rest of the world refuses to accept payments in dollars, we instantly become the brokest nation in the world. What then?
Most of the Great Powers of the past do not exist today. Their empires rose and fell long ago. Like Ozymandias, all that remains is the memory.
I wonder how many people living in Rome in 450 AD knew the empire was falling apart, that barbarians would soon sweep away the old order, that civilization was on the verge of a collapse which would last 1,000 years, and despaired the fecklessness of the rulers who were allowing it happen.
I wonder what date we’re living in now, how long until a visitor to the land once known as America will see the ruins and say:
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.
May 5th, 2022 at 2:55 pm
JD is correct. At least five nations are now accepting Bitcoin and several more are making deals to accept each other’s currency for commerce. China has been making these deals as part of their Belt and Road initiative going back to 2010. They’ve also been stockpiling gold, both physical and in the ground.
Historical economy crasher George Soros, Klaus Schwab, the Rothschilds and many more of the central bank cabal, would love to see the dollar removed as the reserve currency and see the yuan/Renminbi replace it. Not too far fetched, considering how much U.S. debt they own.
May 5th, 2022 at 3:30 pm
End of the day, Russians seem to like western things more than westerners like Russian things. I think the west can learn to live without Russia without to much effort.
The RUB is higher because in FX trading, you have to sell a counter currency and buy RUB. Not sure what currency was shorted to beef up the RUB.
The move away from the dollar will not be easy until the supply chain covering Russia and China (Eurasia) has been built and fully tested.
For now, the US dollar shall hold supreme till the new economic bloc takes hold and it will not be in the near future, but rather in decades.
May 5th, 2022 at 4:15 pm
Russians are survivors. Don’t count them out.
If the key to the success of America is that we believe that we can do anything, the key to the survival of Russia is that it can endure any hardship and remain Russia. They literally name some of their streets after the armies that invaded them.
May 5th, 2022 at 8:00 pm
“ Historical economy crasher George Soros, Klaus Schwab, the Rothschilds and many more of the central bank cabal, would love to see the dollar removed as the reserve currency and see the yuan/Renminbi replace it.”
Hey hey hey!
Watch it with the anti-Semitism.
May 5th, 2022 at 8:01 pm
The democracies must prevail (and with about one-fifth the global population the democracies generate in excess of three-fifths of the world’s money GDP; that is a substantial advantage in weight to achieve the strategic objective).
Russian energy exports must be shifted south and east, which will put these supplies into world markets at low prices and eventually lower the overall price of global energy supplies. Russia would take a disproportionate hit in the overall future decline in energy revenues otherwise available to it. So Russia would take an immediate hit plus a long-term secular hit as other suppliers would get the better future premium prices (for reliability and proximity to European markets). Russia will be creating a long-term discount on future energy prices from whatever global prices are.
May 5th, 2022 at 11:03 pm
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May 6th, 2022 at 11:52 am
jealous blade that 0.2% of the global population were able to achieve much more than the 99.80%? And to deliver just about everything you enjoy (and hate) as far as medicine and science (both hard and soft) are concerned? Where would YOU be without Jews, in the mud hut roasting rats? But then I am sure you would love it and yours would be the juiciest, biggest rat around.
May 9th, 2022 at 11:29 am
Nice attempted threadjack by Swiftee. If you’re curious, Swiftee, given that the Russian army was caught deploying APMs first, and that documented by a number of credible news organizations, I’m guessing this is a KGB plant which used a uniform or two from captured or killed Ukrainian soldiers and some M18s picked up by the KGB in various places where the U.S. (not a signatory to the treaty, mind you) deployed them.
But back to the topic, Russia can really only disengage from the rest of the world by going back to 50 year old technology, and that is going to leave a mark. That’s why they attempted a quick “decapitation” of Ukraine’s government, and now that this hasn’t worked, they are left in a world of hurt unless they decide they’re willing to kill a few hundred million more innocents–and risk the destruction of their own country.