Standard & Poor’s also lowered its rating for the issuance of foreign currency government bonds in Russia to its lowest value. This means that, according to the credit rating agency, Russia can be considered bankrupt in this regard. Standard & Poor’s argues that even if the state pays its debtors in rubles, the question is whether those debtors can exchange those payments for the value they should have received in dollars. Standard & Poor’s is also considering further sanctions against Russia.
Since the Russian invasion of Ukraine, the West has imposed a series of sanctions on the country, many of them financial in nature. For example, Russia’s access to foreign currency it holds with foreign central banks has been cut off, making it difficult for the country to repay its debts to foreign parties. And last week, a US sanction prevented Russia from using US banks to pay off its debts.
Bond traders now estimate that the chance of Russia going bankrupt this year is 90 percent. The last time the state defaulted was in 1998, but only then on domestic debt. The last time this happened for foreign debt was after the February Revolution of 1917.
Numerous sanctions also affect the Russian people. The Russian Central Bank unexpectedly cut interest rates from 20 percent to 17 percent this week to give the economy some support. Meanwhile, inflation jumped to 16.7 percent year on year. In February it was still 9.2 per cent. Food became more expensive by 15.7 percent and fruits and vegetables by nearly 35 percent.
