Russia Fails to Pay Debt but Denies Default

(FILES) A Russian ruble coin is pictured in front of the Kremlin in central Moscow, on April 28, 2022. (Photo by Alexander NEMENOV / AFP)
(FILES) A Russian ruble coin is pictured in front of the Kremlin in central Moscow, on April 28, 2022. (Photo by Alexander NEMENOV / AFP)
TT

Russia Fails to Pay Debt but Denies Default

(FILES) A Russian ruble coin is pictured in front of the Kremlin in central Moscow, on April 28, 2022. (Photo by Alexander NEMENOV / AFP)
(FILES) A Russian ruble coin is pictured in front of the Kremlin in central Moscow, on April 28, 2022. (Photo by Alexander NEMENOV / AFP)

Russia said Monday that two of its debt payments were blocked from reaching creditors, pushing the country closer to its first foreign default in a century due to sanctions over the Ukraine offensive.

The announcement came on the 124th day of Russia's military intervention in Ukraine, with Western sanctions so far failing to force the Kremlin to change its course, AFP said.

The Western economic penalties have largely severed the country from the international financial system, making it difficult for Moscow to service its debt.

The Russian authorities insist they have the funds to honor the country's debt, calling the predicament a "farce" and accusing the West of seeking to drive Moscow into a default artificially.

"There are no grounds to call this situation a default," Kremlin spokesman Dmitry Peskov told reporters after a key payment deadline expired Sunday.

"These claims about default, they are absolutely wrong," he said, adding that Russia settled the debt in May.

Russia lost the last avenue to service its foreign-currency loans after the United States removed an exemption last month that allowed US investors to receive Moscow's payments.

- 'Vicious circle of decline' -
A 30-day grace period for the payment of $100 million in interest payments expired on Sunday night, most of which had to be paid in foreign currency.

Russia had attempted to make the payments, but the finance ministry said Monday that the money had not been transferred to creditors.

International settlement and clearing systems "received funds in full in advance" but the payments were not transferred to the final recipients due to "the actions of third parties," the ministry said in a statement.

"The actions of foreign financial intermediaries are beyond the Russian finance ministry's control," the statement said.

While some experts dismiss the event as a technical default, others say it will have far-reaching consequences.

"This default is important as it will impact on Russia's ratings, market access and financing costs for years to come," said Timothy Ash, an emerging markets strategist at BlueBay Asset Management.

"And that means lower investment, lower growth, lower living standards, capital and human flight (brain drain), and a vicious circle of decline for the Russian economy."

- 'Locked Russia out' -
But Liam Peach, emerging Europe economist at Capital Economics, a research group, said a default was a "a largely symbolic event that is unlikely to have an additional macroeconomic impact".

"Sanctions have already done the damage and locked Russia out of global capital markets," Peach said in a note.

The sanctions included freezing the Russian government's stockpile of $300 billion in foreign currency reserves held abroad, making it more complicated for Moscow to settle its foreign debts.

After the United States closed the payment loophole last month, Russia said it would pay in rubles that could be converted into foreign currency, using a Russian financial institution as a paying agent, even though the bonds do not allow payments in the local currency.

The country last defaulted on its foreign debt in 1918, when Bolshevik revolution leader Vladimir Lenin refused to recognize the massive debts of the deposed tsar's regime.

Russia defaulted on domestic debt in 1998 when, due to a drop in commodity prices, it faced a financial squeeze that prevented it from propping up the ruble and paying off debts that accumulated during the first war in Chechnya.

The International Monetary Fund's number two official, Gita Gopinath, said in March that a Russian default would have "limited" impact on the global financial system.



Trump Mocks Democrats in First Campaign Rally after Assassination Attempt

Donald Trump and Sen. J.D. Vance, Grand Rapids, Michigan, July 20, 2024. REUTERS/Tom Brenner Purchase Licensing Rights
Donald Trump and Sen. J.D. Vance, Grand Rapids, Michigan, July 20, 2024. REUTERS/Tom Brenner Purchase Licensing Rights
TT

Trump Mocks Democrats in First Campaign Rally after Assassination Attempt

Donald Trump and Sen. J.D. Vance, Grand Rapids, Michigan, July 20, 2024. REUTERS/Tom Brenner Purchase Licensing Rights
Donald Trump and Sen. J.D. Vance, Grand Rapids, Michigan, July 20, 2024. REUTERS/Tom Brenner Purchase Licensing Rights

Donald Trump held his first campaign rally on Saturday since he narrowly escaped an assassination attempt one week ago, poking fun at Democrats in turmoil at a heavily secured indoor arena in the election battleground state of Michigan, Reuters reported.

Fresh from his nominating convention where his takeover of the Republican Party was cemented, Trump appeared in Grand Rapids with his new vice presidential pick, Senator J.D. Vance from Ohio. They took the stage in their first campaign event together with the Republican Party unified behind them.

In contrast, it is no longer certain that President Joe Biden will be the Democratic Party's nominee facing Trump in the Nov. 5 election.

Biden has faced calls from some senior Democrats to end his re-election bid after his poor debate performance last month raised concerns over whether he could beat Trump or complete another four-year term.

Trump mocked Democrats, saying they wanted to kick Biden off the ticket after he won their presidential nominating contest.

"They have a couple of problems. No. 1, they have no idea who their candidate is," Trump said to laughter and jeers. "This guy goes and he gets the votes and now they want to take it away."

"As you're seeing, the Democrat Party is not the party of democracy. They're really the enemies of democracy."

He added: "And they keep saying, 'He's a threat to democracy.' I'm saying, 'What the hell did I do for democracy?'

Last week, I took a bullet for democracy."

Opinion polls show a tight race between the two men at a national level but Biden trailing Trump in the battleground states that will likely determine the winner.

Many Democrats fear he may not have a realistic path to victory and that the party needs a new candidate to take on Trump.

There was a heavy police presence at Trump's rally in Grand Rapids on Saturday, with police on every street corner for several blocks.

US Secret Service officers were positioned on the top balconies in the Van Andel Arena, giving them a bird's eye view of the crowd inside.

Bag searches for those entering the indoor arena earlier in the day were long and thorough, and the Secret Service sweep of the building took about an hour longer than usual.

The rally in Butler, Pennsylvania, last weekend was outdoors. At that event, the gunman was able to scale the roof of a building outside the Secret Service perimeter before opening fire on Trump, clipping his ear, killing a rally-goer and wounding several others.

The Secret Service, which is responsible for protecting Trump, declined to comment on security for the Grand Rapids event. An investigation is under way into the security failures at the Butler rally.

Trump gave a detailed account of his narrow brush with death in his convention speech on Thursday, telling the audience that he was only talking to them "by the grace of Almighty God."

Trump's former physician, Ronny Jackson, said on Saturday that the former president is recovering as expected from the gunshot wound to his right ear, but noted intermittent bleeding and said Trump may require a hearing exam.

The bullet fired by the would-be assassin at the July 13 rally in Pennsylvania came "less than a quarter of an inch from entering his head," said Jackson, a Republican congressman from Texas who had served as physician to Presidents Trump and Barack Obama.