Russia

Russia on Monday flagged a likely further cut in interest rates and more budget spending to help the economy adapt to biting western sanctions as it heads for its deepest contraction since 1994, Reuters reported. Russia faces soaring inflation and capital flight while grappling with a possible debt default after the West imposed unprecedented sanctions to punish President Vladimir Putin for sending tens of thousands of troops into Ukraine on Feb. 24. Putin said on Monday that Russia should use its state budget to support the economy and liquidity when lending activity has waned.

Germany’s employers and unions have joined together in opposing an immediate European Union ban on natural gas imports from Russia over its invasion of Ukraine, saying such a move would lead to factory shutdowns and the loss of jobs in the bloc’s largest economy, the Associated Press reported.

Moody's said that Russia may be in default because it tried to service its dollar bonds in roubles, which would be one of the starkest consequences to date of Moscow's exclusion from the Western financial system since President Vladimir Putin's invasion of Ukraine, Reuters reported. If Moscow is declared in default, it would mark Russia's first major default on foreign bonds since the years following the 1917 Bolshevik revolution, though the Kremlin says the West is forcing a default by imposing crippling sanctions.

Russia's central bank sees room for an interest rate cut as weekly inflation is slowing, Deputy Governor Alexei Zabotkin said on Thursday, Interfax new agency reported, according to Reuters. It will present new economic forecasts to coincide with its next rate-setting meeting on April 29, TASS news agency quoted him as saying. The bank raised the key rate to 20% in an emergency move in late February before cutting it to 17% last week.

Russia has pledged 19.5 billion roubles ($238 million) in state support for airlines to refund passengers flying on routes that have been cancelled due to sanctions, Russian Prime Minister Mikhail Mishustin said on Thursday, Reuters reported.

People on the streets of Berlin have waved Ukrainian flags in demonstrations of support since Russia invaded Ukraine in February. But those who drove to the rallies did so largely in cars powered by oil from Russia, which provides most of the fuel to the German capital, Reuters reported. Just over a third of Germany's crude oil came from Russia last year, official data shows. Until the invasion of Ukraine in February, the dependence of Europe's largest economy on cheap energy from Russia – in part, a legacy of the Cold War – was not viewed as problematic by the authorities.

Annual inflation in Russia accelerated to 17.49% as of April 8, its highest since February 2002 and up from 16.70% a week earlier, the economy ministry said on Wednesday, as the volatile rouble sent prices soaring amid unprecedented Western sanctions, Reuters reported. Prices on nearly everything from vegetables and sugar to clothes and smartphones have risen sharply in recent weeks after Russia on Feb. 24 began what it calls "a special military operation" in Ukraine.

Oil is backing up through Russia’s energy supply chain and leading to a drop in crude-oil production, a blow to Moscow’s main economic engine as the war in Ukraine rages, the Wall Street Journal reported. Refiners are trimming output and in some cases closing down because of falling demand at home and abroad. Storage space is running low in pipelines and tanks. Wells, which pump from some of the world’s biggest crude reserves, are dialing down production. The losses so far are modest, and overall the industry continues to generate massive amounts of revenue for Moscow.

Russian Railways JSC has been ruled in default by a derivatives panel after missing a bond interest payment, the first such decision since Russia was slapped with extensive sanctions that complicated financial transactions, Bloomberg News reported. A failure-to-pay credit event occurred after a coupon due on March 14 failed to reach investors by the end of a 10-day grace period, according to the Credit Derivatives Determinations Committee. The decision could set a precedent for the Russian government and local companies which have found themselves in a similar position.

The credit ratings agency Standard & Poor’s has downgraded its assessment of Russia’s ability to repay foreign debt, signaling rising prospects that Moscow will soon default on external loans for the first time in more than a century, the Associated Press reported. S&P Global Ratings issued the downgrade to “selective default” late Friday after Russia arranged to make foreign bond payments in rubles on Monday when they were due in dollars. It said it didn’t expect Russia to be able to convert the rubles into dollars within the 30-day grace period allowed.