Historic Russian Debt Default Creeps Closer As Moscow Threatens Legal Action Over Crippling Sanctions
ForbesSep 09, 2022
Russia Slips into 'Selective Default,' Threatens Legal Action
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Image copyright: Maxim Shemetov/Reuters [via The Guardian]
The Facts
Russia is in a state of 'selective default' on its foreign debt obligations after trying to make interest payments in rubles, according to credit rating agency S&P Global.
Current sanctions make it impossible for bondholders to convert rubles to dollars, meaning that Russia has effectively defaulted on its obligations.
The Spin
Pro-establishment narrative
The increased pressure on Putin's regime will hopefully bring him to the negotiating table to end the crisis in Ukraine. Although Western sanctions on the Russian economy will produce ripple effects in global markets, the US can withstand this.
Establishment-critical narrative
The escalating Western sanctions against the Russian economy are in clear violation of constitutional property rights and they have the potential to escalate into a global economic conflict with dire consequences for human wellbeing. It's hypocritical to seize Russia's foreign reservers for invading Ukraine, but not those of the US for invading Iraq for equally unjustified reasons.
Narrative C
The Russian Central Bank had begun moving away from the US dollar as a store of its foreign reserves even before the invasion of Ukraine. Instead, it shifted its assets into Gold and the Chinese Yuan - moves that will allow it to continue to thwart the sanctions imposed by the West.
Narrative D
Russia is trying to prop up its currency in the face of disastrous Western sanctions by aligning itself with countries that are more loosely linked to the international order, like China and India, and by using its reserves to prop up the ruble. In the long run, this is all destined to fail and the ruble faces real risks of a further collapse.
