[EPA = Yonhap News] There are reports that Russia, which is in crisis due to economic sanctions from the West following the invasion of Ukraine, paid interest on the first maturity government bond. Reuters reported on the 17th that Russia appears to be able to avoid the crisis of default for the time being. The day before, Russia claimed to have paid off $117 million in interest on dollar-denominated government bonds, while creditors in the United States and Europe claimed that it did not.
However, a creditor told Reuters that the interest was paid in dollars contrary to my expectations, and an official in the financial sector said that a customer holding Russian government bonds received interest.
JP Morgan, a Russian currency trading bank, processed money sent by the Russian government to pay interest on government bonds and deposited it into Citigroup, a payment agent, a source told Reuters news agency. Citigroup is said to have confirmed the funds and distributed them to creditors.
Even if Russia paid interest on that day and avoided the national default crisis, the situation is not favorable. The money to be repaid one after another by the 21st, 28th, 31st, and 4th of the next month is over a mountain. The principal and interest of the dollar bonds due on or after May 25, when the U.S. Treasury Departments exemption period ends, totaled $1.788 billion.
Russia has previously insisted on paying interest in rubles, its currency, but the contract is to pay interest in dollars. Credit rating agencies are said to be considered default if Russia pays interest in rubles.
International credit rating agencies such as Fitch downgraded Russias long-term credit rating to C. In Fitchs credit rating system, C stands for the stage just before default.
According to Bloomberg on the 17th, Standard & Poors, an international credit rating agency, downgraded Russias credit rating from CCC- to a lower CC. The credit rating outlook remained negative.
Credit rating CC means limited default status. S&P explained that the downgrade took into account the fact that investors did not receive the interest on the dollar and euro bonds that arrived on the 16th on time from the Russian government due to technical difficulties caused by international sanctions against Russia.
S&P said in a statement that we may consider defaulting if the investor is unable to recover the funds or if the investor does not agree to an alternative payment because the payment is made in a currency not specified in the terms of the debt.
The direct impact on Korea in the event of a Russian national default may be limited, but there are concerns that Russias food export restrictions could fuel oil prices, which are still unpredictable.
IMF head Kristalina Georgieva has also said that a Russian default is no longer impossible.
He was concerned about the default situation, saying that Russias economy is suddenly contracting due to unprecedented Western sanctions, including the US, and is entering a deep recession.
Experts said that Russia is in a situation where it has money but cannot technically pay it back, and predicted that there would be no situation where the global financial market would be shaken in a chain.
The problem is that prices can have a direct impact on the economy rather than finance, experts view.
This is because Russia has an economic structure that relies on natural resources. It is the third largest oil producing country in the world, and together with Ukraine, it accounts for about 30% of world wheat exports. It is also a major supplier of other commodities such as nickel and aluminum.
The recent global problem is high inflation, but if concerns about raw material supply and demand instability grow due to Russias default, prices will inevitably soar more rapidly. Moreover, as Korea relies on imports for most of its raw materials, including crude oil, a considerable level of economic shock is inevitable.
According to several sources from the financial industry, Russia and Ukraine do not account for a large portion of the financial sector, but the global price level could be hit directly due to the large share of raw materials and food supplied, the World Food Organization said. In the forecast, it is predicted that the world economy may experience a bigger price shock after Russias national bankruptcy.
