European Commission President Ursula von der Leyen admitted today that Russia’s entry into default is “a matter of time” due to Western sanctions imposed over the invasion of Ukraine.
“The bankruptcy of the Russian state is just a matter of time,” von der Leyen was quoted by the Russian news agency TASS as telling the German newspaper Bild am Sonntag.
Von der Leyen said the sanctions were increasingly affecting the Russian economy “week after week”, and that “goods exports to Russia fell by 70%”. “Hundreds of large companies and thousands of specialists have left the country. GDP [Produto Interno Bruto] In Russia, according to current forecasts, it will decrease by 11%, ”said the German policy.
According to the data of the Russian Ministry of Finance cited by TASS, Russia’s external public debt is $59,500 million (more than 55 thousand million euros at current exchange rates), which is equivalent to 20% of the public debt.
In total, the Russian Federation has 15 active bond loans with maturities between 2022 and 2047.
In response to the sanctions, Russian President Vladimir Putin allowed the use of the national currency, the ruble, to repay foreign currency debts of “unfriendly countries”, that is, those that imposed sanctions on Moscow.
According to the decree cited by TASS, debtor companies or the state itself can open an account with Russian banks in the name of a foreign creditor and transfer payments in rubles at the Central Bank exchange rate on the day of payment.
Creditors from countries that have not imposed sanctions can receive payments in euros or dollars if the Russian debtor has a special mandate to do so.
Russian Finance Minister Anton Siluanov admitted this week that the freezing of the Russian state’s foreign currency accounts, caused by international sanctions, is making it difficult to meet debt obligations.
“There are difficulties in meeting sovereign debt obligations only because of the lack of access to our foreign currency accounts,” Siluanov said in a letter sent to his Brazilian counterpart Paulo Guedes.
In the letter published by the Brazilian newspaper O Globo, Siluanov requested Brazil’s diplomatic support with the International Monetary Fund, the World Bank and the Group of Twenty to avoid “attempts to discriminate in international financial institutions and multilateral forums”.
“Almost half of the international reserves of the Russian Federation have been frozen, and foreign trade transactions, including those with our partners in emerging market economies, have been blocked,” the Russian minister explained.
Siluanov previously said, according to TASS, that Russia will only repay its foreign currency debt if its foreign accounts are unfrozen.
A state is considered in default when it is not able to fulfill the obligations it has undertaken with creditors.
On April 9, global rating agency Standard & Poor’s lowered Russia’s rating on its foreign currency payments to “selective default” after Moscow resorted to the ruble to pay off dollar-denominated debt.
In a recent interview with a Russian newspaper, Siluanov said that Russia would go to court if it was found to be underdeveloped by the West, although he did not specify what legal degree he was referring to.
After the invasion of Ukraine on February 24, Russia was subjected to economic and financial sanctions from the European Union and countries such as the United States, United Kingdom, Japan or traditionally neutral Switzerland.