Russia has announced that it will no longer issue government bonds for the time being.
(Photo: AP)
Moscow, Frankfurt In view of the economic sanctions imposed due to the war in Ukraine, the Russian state no longer intends to issue government bonds for the time being. In an interview with the daily newspaper “Isvestia” published on Monday night, the Russian Economics Minister Anton Siluanov announced that the country would not place any more bonds in the course of the year.
According to the minister’s assessment, the income from the sale of oil and gas, among other things, is sufficient to cover the state’s current expenditure.
But there are other reasons behind the decision: “We plan not to go to the local markets, nor to the international ones. The costs would be astronomical,” said Siluanov, referring to the high interest rates that the Russian state is currently having to offer investors. Last week, derivatives, which investors can use to hedge against a default on Russian government bonds, signaled a 99 percent chance that Russia would default on its financial commitments.
Siluanov also announced in the interview that Russia would take legal action if Western sanctions forced the country into default. “Of course we will complain, we have taken all precautions to be able to service our liabilities,” emphasized the minister.
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Earlier, Russia, whose foreign exchange reserves are largely blocked due to Western sanctions, repaid two bonds in rubles and not in dollars as planned. The Treasury Department in Washington had prevented the government in Moscow from making the payments due from the foreign exchange reserves held in US banks, which had been possible up to that point in time. Until then, the major US bank JP Morgan Chase had processed the Russian payments as a correspondent bank. It has now been stopped by the Treasury Department.
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As a result, the US rating agency Standard & Poor’s (S&P) downgraded Russia’s creditworthiness again at the weekend and lowered the rating to “Selective Default”. This indicates a partial payment default.
The downgrade was the last S&P rating of Russia’s creditworthiness. The rating agency has stopped checking the creditworthiness of issuers from the country, just like the other two leading international rating agencies, Moody’s and Fitch. The background to this is sanctions by the European Union, which prohibit agencies from assessing Russia’s creditworthiness in the future.
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