Credit ratings agency Fitch said on Tuesday that if Russia were to make two U.S. dollar bond coupon payments due Wednesday in roubles, it would constitute a sovereign default after a grace period expiration, Reuters reported. Russia's invasion of Ukraine last month triggered sanctions from across the world that have limited Moscow's ability to access and allocate cash. "The payment in local currency of Russia's U.S. dollar Eurobond coupons due on 16 March would, if it were to occur, constitute a sovereign default, on expiry of the 30-day grace period," Fitch said in a statement.
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The invasion of Ukraine has placed Russia on the verge of bankruptcy, the Economic Times of India reported. Interest rates have doubled, the stock market has closed, and the rouble has fallen to its lowest level ever. The military costs of war have been exacerbated by an unprecedented level of international sanctions, sustained by a large coalition of countries. Russian citizens, now unable to spend at IKEA, McDonald's or Starbucks, are not allowed to convert any of the money they do have into foreign currency.
Russia's finance minister has confessed that nearly half of the country's foreign exchange reserves, which are viewed as a critical instrument for resisting Western economic sanctions, are insufficient, Wio News reported. According to a report by Interfax, the independent Russian news agency, Anton Siluanov said in an interview with Russian state television on Sunday that Russia had about $640 billion in foreign reserves, with about $300 billion of that amount frozen due to sanctions imposed by the U.S., Europe and other Western nations.
Hundreds of foreign companies have announced a partial or total withdrawal from Russia in recent weeks amid continuing fighting in Ukraine, The Bell reported. These include Apple, IKEA, McDonald’s, Microsoft, IBM, Sony, Shell, Porsche, Volkswagen, H&M, Inditex (that includes Zara, Bershka, Massimo Dutti, Pull&Bear), Procter & Gamble (that covers brands including Tide, Ferry, Pampers and Head & Shoulders), Universal, Mars, Warner and Sony Music.
A Russian sovereign default is no longer improbable, though it’s unlikely to trigger a global financial crisis, International Monetary Fund Managing Director Kristalina Georgieva said, Bloomberg News reported. With Russia and Russian banks under sanctions by the U.S. and its allies after the full-scale invasion of Ukraine, Russia’s credit rating has faced downgrades. Fitch Ratings said last week that a bond default is “imminent” as a result of measures imposed since the war in Ukraine began on Feb. 24.
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Ukraine's top government economic adviser Oleg Ustenko said on Thursday that invading Russian forces have so far destroyed at least $100 billion worth of infrastructure, buildings and other physical assets, Reuters reported. Ustenko, chief economic adviser to Ukrainian President Volodymyr Zelenskiy, told an online event hosted by the Peterson Institute for International Economics that the war has caused 50% of Ukrainian businesses to shut down completely, while the other half are operating at well below their capacity.
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Russia’s government moved closer to seizing and even nationalizing foreign-owned companies that are leaving the market over the invasion of Ukraine while planning measures to coax others into staying, Bloomberg News reported. In the first explicit response to the exodus of foreign businesses from Ikea to McDonald’s Corp., the Economy Ministry has outlined new policies to take temporary control of departing companies where foreign ownership exceeds 25%. Under the proposals, a Moscow court would consider requests from board members and others to bring in external managers.
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Aeroflot Russian Airlines PJSC spent billions of dollars over two decades transforming itself from a stodgy, Soviet-era carrier, with bland food and uncomfortable seats, into an award-winning airline flying new jets around the world, the Wall Street Journal reported. In two weeks, all that progress threatens to come undone—providing an example of how one of Russia’s best-known and most internationally connected companies has been threatened by Moscow’s invasion of Ukraine and the West’s response.
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Trading on credit-default swaps, used to insure against non-payment, has skyrocketed this week despite the myriad of questions over whether Russia’s plan to repay some foreign bondholders in rubles could ultimately be judged as a default, Bloomberg News reported. There are even concerns that international sanctions and existing bond terms could complicate any settlement of the $39.7 billion of outstanding contracts. And yet, the swaps suggest a record 71% chance of default within one year and 81% within five years, according to ICE Data Services.
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Cryptocurrency evangelists are on the defensive amid warnings from U.S. and European lawmakers that digital asset companies are not up to the task of complying with Western sanctions imposed on Russia following the country’s invasion of Ukraine, Reuters reported. The criticism has seen the crypto industry scrambling to regain control of the narrative, with many executives frustrated that the compliance regimes in place at leading exchanges, such as Coinbase and Binance, are being called into question.
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