Top of the morning, readers. Today we’re breaking down Moscow’s looming default crisis, and how the US Treasury’s recent move complicates debt payments for the heavily sanctioned nation.
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1. Russia is on the very brink of default. This week, the US Treasury blocked JPMorgan from processing Russia’s attempt to make debt payments of more than $600 million, ramping up pressure on Moscow.
Russia is no longer allowed to make sovereign bond payments using American banks after the Treasury’s Monday policy change. A Russian debt default would likely be a major worry for the government, which could be locked out of capital markets for years.
Timothy Ash, an economist at BlueBay, told Insider he put the chances of a default at 80% following this latest move.
According to the country’s Finance Ministry, the Russian government has enough dollars to pay up, as it still has access to about half of its $640 billion of its currency reserves. But now Russia will likely struggle to find a bank to process payments, Ash explained, plus Western bondholders may be reluctant to receive money.
Meanwhile, on Wednesday, Russia said it had sent $650 million bond payment in rubles after the US Treasury blocked payment transfers in dollar. The day before, the country’s second-largest bank made bond payments in rubles instead of dollars or euros.
State-owned companies, too, are facing issues paying their bondholders. The clock is ticking on Moscow.
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