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Wikipedia: "On 17 August 1998, the Russian government ... declared a moratorium on repayment of foreign debt." Unilaterally declaring a moratorium may be consi
by t_mann 4y ago
Wikipedia: "On 17 August 1998, the Russian government ... declared a moratorium on repayment of foreign debt."
Unilaterally declaring a moratorium may be considered a default event, but ultimately it depends on what exact definition you're using. Wikipedia doesn't say how the rating agencies treated that event, their collective view is usually seen as authoritative in such situations. If you have a copy of This time is different on sovereign debt crises by Harvard economists Carmen Reinhart and Kenneth Rogoff lying around, you could check how they classified this event (my hinge is that they'd count it as one).
I agree, it's a strange to borderline misleading headline, especially if the article fails to discuss the technicalities of this moratorium.
PS: I'd argue that 1998 was in some sense "more" of a default than this, because defaults are usually related to the borrower being unwilling or unable to pay, which was the case in 1998. Forcing a solvent and willing party into missing a payment by closing their bank accounts is really a bit of a different story.
- taylodl 4y agoForcing a solvent and willing party into missing a payment by closing their bank accounts is really a bit of a different story. Will that distinction make a difference to international investors? I think the West has achieved their objective of making Russia unattractive for investment.
- Grustaf 4y agoYes, but through the sanctions, not through the engineered, technical default. It's not like potential creditors will look up Russia's credit score and see that it's low, they will know exactly what happened.
- Aperocky 4y agoOther than being a country in a war, which is naturally unattractive for investment, this only achieve making western investment in Russia unattractive, if it's not already unattractive enough as it's in a proxy war of sorts. China and India can continue to invest because confidence in Russia's continued willingness to service their debt has not eroded. They'll just use something other than the US dollars or the Euro. That would even be nicer for them because its an opportunity for China and India to expand the international usage of their currently very much local currency.
- t_mann 4y ago> Will that distinction make a difference to international investors? It does make a difference because the questions that the investors have to deal with now are completely different to a "normal" default. Normally, there simply is no money, or you have to find a court where you can sue the foreign government. Now, there is money, and they could actually get paid today (maybe even in dollars) if they are happy to open a Russian bank account (I remember Russia suggesting something along those lines, basically the reverse of what they used to force Europeans to pay in Rubles for their gas). But that raises other questions: would that be breaching any sanctions? How are they going to get the money out? At what rates? The answers will also depend on their jurisdiction, whether they do any business with the US etc (a purely Chinese investor might actually be fine now). So in that sense it is quite different, but the result is similar (arguably even worse) - Russia is pretty much cut off from international (especially Western) capital markets, that's true.