- Russia’s previous debt default in 1998 followed the Asian crises in 1997.
- On March 16, Russia missed a hard-currency coupon payment on its sovereign bonds.
The Russian government’s willingness to pay on its debt obligations is now explicitly in question following comments by the Putin regime, despite economic buffers put in place before the events of recent weeks.
Russia sits with a large current account surplus (meaning that the country is a net lender to the rest of the world) and deep international reserves suggested to be as large as $650 billion. 50% of these reserves are based in U.S. dollars, euros, or sterling and are held with western institutions, and with recently imposed sanctions, are now inaccessible.
Approximately 12% of the country’s reserves are in gold, which, while accessible, are not liquid. The remaining assets are either in rubles (which have devalued significantly) or Asian currencies (Chinese yuan being the largest holding). This accessibility problem changes the fundamental picture for “Fortress Russia” (the notion that Russia’s reserves would allow it to withstand Western sanctions) considerably.DOWNLOAD THE FULL COMMENTARY
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