Russia Debt Default Hardest In History To Resolve 2022

The debt default by Russia is the country’s biggest ever and will not be resolved quickly despite a global fire sale of its holdings of US bonds, experts warn. For the first time since its collapse as a superpower, Russia has been unable to make an annual payment on its restructured foreign currency bonds, worth a total of $70bn.

The hardest default in history is unfolding as Russia struggles to repay $16 billion of debt including bonds, loans and commercial paper. As a result, investors from California to China are watching the fallout from Russia’s escalating currency crisis even if the creditworthiness of some of those investors is at risk.

By default Russia is on its way to the biggest sovereign debt in history, but is seen as nowhere as disastrous for global markets as the bankruptcy of Lehman Brothers. Unlike the collapse of the US bank, which unleashed a global financial crisis after triggering potential chain-reaction defaults, investors would expect the Russian government to marshall the world’s largest official foreign exchange reserves to prevent deeper damage to its economy.

The failure by Russia to repay on time US$3 billion it owed to foreign investors will have bigger consequences than any other sovereign default, support analysts have said.

And Russians and foreigners alike are struggling to understand how the government ended up in this unprecedented bind. Russia is the only country to default on its domestic debt in the 2000s, but so far top officials have been cryptic about how and why they got into this mess.

Russia’s $150 billion debt default announced today is the largest in more than a decade, underscoring the challenges ahead after Russia’s move to seize control of Crimea. The bonds were restructured in 2005 and 2010, but the country tried defaulting on them again in 2013 before reaching an agreement with bondholders. Now that Russia has once again chosen to abandon its obligations, these bonds may become nearly worthless as investors expect that Russia will indeed seek retaliation against Western nations and international companies.

Concern is growing over Russia’s ability to service its debt after state-run oil firm Rosneft defaulted on an $11 billion debt this week and prices plunged. The country’s economy, which relies almost exclusively on energy exports, has been battered by Western sanctions in response to Moscow’s involvement in the Ukraine crisis.

The Russian government’s decision not to service its bonds due to in-play political turmoil is a first in the history of emerging markets, Moody’s said as it rated Russia Ba1/NP, two notches above junk.

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