Key US licence needed to transfer bond payments expires on May 25 and the next step is far from certain
Russian finance minister Anton Siluanov. Picture: REUTERSThe prospect of Russia defaulting on its sovereign default is moving centre stage again with a deadline for a US licence allowing Moscow to make payments expiring on May 25 and $100m in interest payments due shortly afterwards.
An extension by Washington seems an increasingly remote scenario. Treasury secretary Janet Yellen said that while no final decision had been taken, it was"unlikely that it would continue".Those in favour of extending argue that allowing Russia to service its debt would drain its war chest by forcing Moscow to use its foreign currency rreserves evenues to make payments to creditors after about half of the country's $640bn reserves were frozen.
The premise has yet to be tested, but experts believe it could be difficult for Russia to make that argument given sanctions were a response to its invasion of Ukraine. The case is very complex, said Ian Clark, a partner at White & Case, who thinks Russia might still be able to make the payments to the registered noteholders at the national securities depository in Russia, outside US jurisdiction.
In a cease-fire scenario, the country will try to rebuild international economic ties that have been cut off during the war, said Chris Miller, Eurasia Director at Greenmantle and the author ofA sovereign default would complicate access to capital markets even for non-sanctioned corporates and also push up their borrowing costs, Miller said.
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