Russia has defaulted on its foreign debt, says S&P : worldnews


In the case of USD bonds, Russia has borrowed from US institutions (in most cases), so they’re trying to pay back the capital amounts and interest payments.

At the state level, these are huge amounts – up to $600 million, or even more.

Russia has billions of USD debt outstanding, i.e. to pay back, with interest, to the US banks and investment houses. They probably have several repayments due every week.

So, technically, it’s the US financial institutions that are losing out on the current debt repayments that aren’t being repaid, and the interest.

The Russian state will lose out in the future because they can’t borrow from the West. And everyone else (like China) will make Russia pay more for borrowing money from them.

But it’s not that simple. Large US/Western financial institutions are actually still trading Russian debt between themselves and making loads of money because of the risk factors that have reduced its value versus the market expectations.

Banks can always find ways to make money.

Also, the banks arrange ‘insurance’ through financial instruments, for example Credit Default Swaps, which reduce their risk and potential losses.

In reality, the overall effect will probably not damage the US banks very much, but it severely limits Russian borrowing – and all states need to borrow to keep markets and industries ‘liquid’ and keep money flowing between the domestic banks and people, e.g. government employee salaries, including the Army.

If Russia can’t borrow, then they have to keep using their savings, which will quickly run out if a lot of it is blocked. This is also why the oil and gas payments are so important – Europe and others are paying with hard currency. But again, if Russia can’t exchange those USD and Euros, then they’re stuck again.

The idea is to block Russia no matter which way they try to turn. We just need China and India, and a few others, to play the game our way.

The markets are complicated, but don’t worry about the US banks, they know how to look after themselves.


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