Defolt in Russia may occur in late May due to a ban on servicing sovereign debt-Bloomberg

Western sanctions imposed against Russia do not yet prevent it from serving sovereign debt in dollars. This situation will not change until the end of May, Bloomberg reports with reference to the representative of the US Department of Finance.

This week, Russia should pay coupons in the amount of over $ 117 million for two releases of Eurobonds. This will be the first payment on its external debt after freezing part of the reserves as a result of the sanctions introduced for Russian invasion of Ukraine. On March 14, the Ministry of Finance of the Russian Federation said that he sent a payment order for the payment of coupons from frozen funds. If the order is not executed, then the Russian government intends to pay with rubles. This is qualified by market participants as a default.

According to the representative of the US Treasury, the Americans are allowed to “receive interest, dividends or payments for expiring debt papers or shares from the Central Bank, the Federal Tax Service and the Ministry of Finance of the Russian Federation until 12:01 on eastern daytime [USA] on May 25, 2022” (17:01 Moscow time May 24). After this period in Russia, a default may occur even if the Government of the Russian Federation continues to pay off creditors in dollars.

Earlier, Bloomberg wrote that the external debt of Russia and its companies reaches $ 150 billion and default can be announced in the country on March 16. “The indicative price of the country's bonds estimates some of them at about 20 cents per dollar. Despite the fact that just a few days before the invasion the same banknotes were traded above the face value, ”Bloomberg said.

Enterprises and households are faced with a two -digit economic recession and acceleration of inflation to 20%, Bloomberg reports. According to the Minister of Finance, about half of the country's foreign exchange reserves - about $ 300 billion - are frozen. Regardless of the Kremlin’s policy regarding payments on external debt, it will be more difficult for companies to fulfill its obligations, since a drop in demand affects sales and profits.

Bloomberg predicted three scenarios. According to the first, Russia will still pay the debt in dollars, and then the default will be defended at least until April 4. According to the second scenario, Russia will pay the debt in rubles, but the payment of March 16 will be considered made only in currency, otherwise it will mean default. And finally, the third option - Russia will not pay at all. Necade will launch a grace period of 30 days, after which the default will come, suggested Bloomberg.