Russia and Belarus are close to default due to huge sanctions imposed on their economies by the United States and allies over the war in Ukraine, according to World Bank Chief Economist Carmen Reinhart.
The risk of Russia defaulting on $40 billion in foreign bonds, its first major default since the years after the 1917 Bolshevik Revolution, has hung over markets since a series of Moscow sanctions and countermeasures have left the country outside the global financial markets.
“Both Russia and Belarus are in default territory,” Reinhart said in an interview. “They are not yet qualified by the agencies as a selective default, but they are very close.”
Reinhart said that, so far, the repercussions in the financial sector have been limited, but that risks could arise if European financial institutions were more exposed to Russian debt than assumed.
Half of Russia’s sovereign bonds are held by foreign investors, and Moscow is due to pay $107 million in coupons on two bonds on March 16. Russian companies have about $100 billion of international bonds outstanding.
Foreign banks are exposed to Russia for just over $121 billion, much of it concentrated with European lenders, according to the Bank for International Settlements.
“I am concerned about what I don’t see,” said the WB official, “Financial institutions are well capitalized, but balance sheets are often opaque… There is the issue of Russian private sector defaults. You can’t be complacent.”
Help for Ukraine
The board of the International Monetary Fund (IMF) approved an emergency financing of 1,400 million dollars for Ukraine, in order to help the country with the massive humanitarian and economic crisis caused by the Russian invasion.
IMF Managing Director Kristalina Georgieva said the package will provide critical financial support which, in turn, will help mobilize the funds needed to mitigate the economic impacts of the war.
The IMF’s aid package will provide critical financial support that will, in turn, facilitate a large-scale mobilization of funds needed to mitigate the economic impacts of the war.
Russian senators and tycoons blacklisted
The 27 members of the European Union (EU) decided to extend their sanctions against Russia and Belarus by excluding three Belarusian banks from the international financial platform Swift and adding 14 Russian tycoons and 146 senators to their blacklist.
The EU also decided to ban the export of parts and technologies destined for the maritime sector to Russia and include cryptocurrencies in the sanctions, the European Commission said on Twitter.
The sanctioned millionaires and businessmen, as well as members of their families, work in key sectors of the Russian economy, such as agriculture, the steel industry or telecommunications.
Senators are part of the Russian Federation Council, the upper house of Parliament.
The Europeans also prohibit any transaction related to assets of the Belarusian central bank, which contributes to isolating the institution. They also drastically restrict the access of Belarusians to European financial markets for amounts greater than 100,000 euros. (AFP)