Russia Hands 'Default Ball' to the West... WB Warns "A Second Long-Term Capital Crisis May Occur"

Russia Bond Maturity Schedule

[Asia Economy Reporter Kim Hyunjung] On the 16th, Russia announced that it would pay the interest on government bonds due on that day in frozen foreign currency, shifting the blame for a 'default' onto the West. This move takes into account the expanding damage to American and European investors if the West does not ease sanctions. Some fear that if the situation prolongs, the 'Long-Term Capital Management (LTCM) crisis' during Russia's 1998 bankruptcy could be reenacted.

According to major foreign media such as Bloomberg and The Wall Street Journal (WSJ) on the 16th (local time), Russia applied to pay $117 million (approximately 143.3 billion KRW) in interest on two dollar-denominated government bonds maturing that day. Anton Siluanov, Russia's Minister of Finance, said in an interview with the state media Russia Today (RT) that "Russia has fulfilled its obligations to bondholders," but added, "Whether payment in foreign currency is possible is not up to us." He emphasized, "We have the money, we have made the payment, and now the ball is in the U.S. courts' court." By the close of banks in New York that day, Russian bond investors in the U.S. and Europe had not received interest payments in dollars.

Russia also indicated that if the U.S. blocks foreign currency payments, it could pay in rubles instead of dollars. However, since the bonds do not include provisions allowing repayment in rubles, this scenario is impossible. The day before, the international credit rating agency Fitch stated that if payment is not made within the 30-day grace period, Russia's credit rating would be further downgraded to 'restricted default.'

Some express concerns that the 1998 collapse of the American hedge fund Long-Term Capital Management, which engaged in aggressive leveraged investments following Russia's default, could be repeated. Carmen Reinhart, Chief Economist at the World Bank (WB), recently told Bloomberg, "Russia accounts for only 3% of global GDP, but it is difficult to know who is exposed to unexpected risks," adding, "The LTCM crisis in 1998 was also not detected on the radar in advance."

Meanwhile, Russia faces upcoming government bond principal and interest payments of $65.63 million on the 21st of this month, $548.53 million between the 28th and 31st, and $2.12938 billion on the 4th of next month.

This content was produced with the assistance of AI translation services.