Russia will initiate legal proceedings if it is declared in receivership from the West, Finance Minister Anton Siluanov said in an interview published Monday to the specter of a massive default of private companies from the country.
“We will go to court, because we have taken all necessary measures to make sure that investors receive their payments,” the minister told the Izvestia newspaper.
“We will present to the court our invoices confirming our efforts to pay both in foreign currency and in rubles. It will not be an easy process. We will have to very actively prove our position, despite all the difficulties,” he added, without specifying to which legal instance they would resort.
rating agency S&P Global Ratings lowered Russia’s note for its foreign currency payments to “selective default” on Saturday after Moscow repaid a dollar debt in rubles last week.
The note was downgraded to the “SD” level, the last step before “D” for bankruptcy, while the note remains at “CC” for ruble payments.
Later, S&P indicated that it was stopping its evaluations of Russia as Fitch and Moody’s did.
Even so, the default can still be declared by a private creditor who publicly reveals that Russia has stopped paying him or by the American agency ISDAwhich manages credit default swaps (CDS), a kind of insurance against default.
“Economic War”
“Russia tries in good faith to repay external creditors by transferring the corresponding amounts in foreign currency to pay our debt. However, the deliberate policy of Western countries is to artificially create a default by all means,” Siluanov declared.
“If an economic and financial war is unfolded against our country, we are obliged to react,” he added.
The minister indicated that Russia’s foreign debt represents between 4.5 and 4.7 trillion rubles (53.4-56.3 billion dollars at current exchange rates), 20% of all its public debt.
The Russian minister “is trying to save honour,” estimates Slim Souissi, a banking specialist who worked for Fitch.
But if Russia reimburses its payments “in unfavorable conditions for investors”, with delay or with another currency than the one contracted, this will represent “a situation of default”, he assures.
A country is considered in its pension payment when it cannot meet its commitments to creditors.
Until now, Russia has avoided this situation by using its foreign exchange funds abroad to satisfy its debt.
But, since last week, Washington has not authorized Moscow to repay its debt with dollars deposited in US banks. As a consequence, the JP Morgan bank blocked a payment from Moscow, which then announced that it had paid in rubles the amount of 650 million dollars that it had to return on April 4.
private defaults
According to many analysts, Russia’s default is close, if not inevitable, which would cut off its access to financial markets and make it difficult to return for years.
Asked by Izvestia, Siluanov declared that Russia “no longer needs to borrow on the markets” and that it does not trust foreign credit or Western currencies.
But more than the public default, what can seriously disturb the market is the massive suspension of payments by private groups.
On Monday, mining giant Alrosa announced that it was unable to meet an $11.6 billion payment for sanctions.
On the same day, an ISDA committee, requested by creditors, declared a “failure in the payment of a loan” of the Russian Railsways railway company that failed to repay interest planned in March.
It is the first statement of its kind from a Russian company but the range may be widened in the coming weeks, Souissi said.
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