(Moscow) Russia will start legal proceedings if it is declared in default by the West, said Finance Minister Anton Silouanov in an interview published on Monday, the country having been placed in “selective” default on Saturday by an agency of ratings.
Posted at 8:14 a.m.
“We will go to court, because we have taken all necessary measures to ensure that investors receive their payments,” the minister replied to the newspaper. Izvestia.
“We will present to the court our invoices confirming our efforts to pay both in foreign currency and in rubles. It will not be an easy process. We will have to prove our position very actively, despite all the difficulties,” he added, without specifying which legal body Russia would turn to.
Financial ratings agency S&P Global Ratings on Saturday lowered Russia’s rating for foreign currency payments to “selective default”, after Moscow settled a dollar debt in rubles last week.
The rating for payments in foreign currencies is lowered to “SD” (last notch before the “D” for default), while the rating remains at “CC” for payments in rubles.
S&P immediately indicated that it was ceasing its ratings of Russia, like the agencies Fitch and Moody’s.
But a default can still be formalized by a private creditor publicly revealing that a country has stopped repaying it, or by the American agency ISDA (International Swaps and Derivatives Association), which governs CDS, a kind of insurance against default of payment.
“Economic and financial war”
“Russia has tried in good faith to repay external creditors by transferring the corresponding amounts in foreign currency to pay our debt. Nevertheless, the deliberate policy of Western countries is to artificially create a default by all means,” the Minister further stated.
“If an economic and financial war is waged against our country, we are obliged to react, while fulfilling all our obligations,” he added.
The Minister indicated that Russia’s foreign debt represented approximately 4500 to 4700 billion rubles (about 52 billion euros at the current rate), or 20% of the total public debt.
Like all states, Russia borrows money in the form of bonds, often in dollars, and must regularly pay interest and repay capital.
A country is considered in default when it is unable to honor its commitments to its creditors.
For several weeks, Russia has averted the danger of a default, as the US Treasury has allowed the use of foreign currencies held by Moscow abroad to settle foreign debts.
But, since Monday, Washington no longer authorizes Russia to repay its debt with dollars held in American banks. Therefore, the JPMorgan bank blocked a payment from Moscow.
The Russian Ministry of Finance announced as a result that it had settled in rubles 650 million dollars due on April 4.
A default on its external debt cuts a country off from the financial markets and complicates its return for years.
Questioned by Izvestia on the question, Mr. Siluanov declared that Russia “no longer needs to borrow on the markets today” and no longer “trusts” foreign loans as well as Western currencies.
“Everyone now sees that the global economy can become an obstacle to the country’s development. We will focus on our own development, on the creation of national industries,” he added.