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Western investors will receive interest on Russian bonds: “We will pay them in rubles”

Western rating agencies may declare default on Russia as early as early July.

Western rating agencies may declare default on Russia as early as early July.

A photo: Shutterstock

President Vladimir Putin signed a decree “On the temporary procedure for the fulfillment of obligations to foreign creditors”. According to them, Western investors will be able to receive payments on our external debt. The amount is about 400 million dollars. In ruble terms.

Sounds like an ultimatum. But in fact, there is more symbolism than real complexities. The whole essence of the changes is that recipients need to open two accounts in a Russian bank: one in rubles and one in foreign currency. Interest on government bonds will be credited to a ruble account – at the rate of the Central Bank. After that, the lender can immediately convert them into dollars or euros and withdraw them abroad.

Many Russian banks still have the ability to transfer money abroad. There shouldn’t be any difficulties here. It’s just a matter of principle. As Finance Minister Anton Siluanov famously said at a recent forum in St. Petersburg: “We can give a horse access to water, but we cannot force it to drink.”

Recall that in the spring the Ministry of Finance has already made payments on external debt twice. Each time overcoming new obstacles. Which looks extremely strange: as if not we, but they owe us money. At the same time, we do not have any financial difficulties with the payment of the state debt.

Vladimir Putin signed a decree

Vladimir Putin signed a decree “on a temporary procedure for fulfilling obligations to foreign creditors”, according to which foreign creditors will receive payments on Russia’s external debt in rubles.

A photo: REUTERS

There is enough money in the treasury. Export earnings are at their peak. The external debt is only $38 billion. For comparison, this is how much we earn from exports in just a month. That is, Russia could pay off its creditors even now. After all, this is only 10% of our gold and foreign exchange reserves, even halved by the sanctions.

Despite this, Western rating agencies can use a formal reason – and still declare default on Russia in early July. She said she violated the terms of the contract. I was supposed to pay in dollars, but I paid in rubles. In theory, this could threaten us with exclusion from global financial markets. Getting money in debt with such a stain on the reputation will be more difficult. In practice, everything is a little more prosaic.

First, we have borrowed before just for the sake of appearances. To have a good credit history for the future. We had enough of our own reserves. Secondly, in the current situation, Russia will still not be able to get foreign funding. Streams are already cut off. And from that side. A formal declaration of default will not change anything. Unless it allows Western politicians to flaunt this fact in front of their own audience. Like, you see what our sanctions have brought Russia to! Although in reality nothing will change either for the country as a whole or for individual Russians.

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