Russia poised for first major debt default in a century

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Russia poised for first major debt default in a century

With the final deadline on a pair of Russia's overdue interest payments of $100 million passed on Sunday night, Western media outlets stated that Russia is poised for its first major debt default in over a century, due to the fact that bondholders have not yet received the payments. The reason why international creditors could not receive payments is because of Western sanctions, which has made it impossible for Russia to get the payment to investors. Russia argued that it already fulfilled all obligations when it sent the funds to Russia's National Settlement Depository, which was then transferred to the Euroclear Bank and has been stuck there, Bloomberg reported on June 8. Over the past several months, the Kremlin has accused the US and its Western allies of trying to force Russia into an artificial default, which observers believe is intended to completely isolate Russia from the international financial market and crush the Russian economy. Russia can't accept the default designation from the West, due to its vast oil and gas revenues and merely $40 billion in foreign liabilities. Russia is still trying to fulfill its debt obligations despite the hurdles erected by Western governments. According to a decree signed by Russian President Vladimir Putin on Wednesday, the finance ministry of Russia is transitioning to the procedure of paying rubles on foreign bonds. Russia's response is a viable alternative for foreign investors caught up in Western sanctions. The Russian ruble has gone up against the dollar in recent days, which has jumped to a seven-year high against the dollar and the euro last week. In international markets, converting the ruble to other currencies is not a big problem. Second, accept the ruble payment means that investors don't have to go through lengthy legal procedures to recover their investment losses. While the economic war between the US-led West and Russia continues to escalate, one thing has become clear: the Western unilateral sanctions against Russia are not only ineffective in pressuring Moscow, but can actually cause massive losses for global investors. Consumers and businesses in the West are bearing the brunt of their governments' policies because of the sanctions, exacerbated already high global inflation. There are signs that the US and its allies are looking to double down on their toxic policies. According to some media reports, leaders of the G 7 countries are preparing to impose new sanctions against Russia's technology and defense sectors at the ongoing summit in Germany. U.S. President Joe Biden has also reportedly said that the G 7 will ban Russian gold imports. There are calls in the West to confiscate the frozen reserves of the Bank of Russia. Russia has more than 600 billion of gold and forex reserves frozen overseas. If the US and its Western allies seized the reserves, it would be much more serious than the artificial bond default, and could escalate the economic war between the West and Russia with even greater global implications. If the US and its allies decide to seize Russian assets, Moscow would almost certainly fight back, and an all-out economic battle between the West and Russia would cause serious damage to global financial markets and supply chains. Given the bleak prospect, the US and its allies are advised to be cautious about what they plan to do next. It is now clear that their sanctions cannot end the conflict, and Western economies as well as the global economy can't afford more reckless sanctions from Western governments, especially given their inept and irresponsible domestic economic policymaking has already inflicted pain on the global economy.