Russian bond default ‘imminent’ as inflation surges; markets soar as oil falls – business live | Business
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Russia is on the verge of defaulting on its debts, the rating agency Fitch has warned, as sanctions imposed since the war in Ukraine hit its economy.
Fitch cut Russia’s sovereign debt to its second-lowest level, down six notches to C. That’s just a step above defaulting borrowers.
The agency warns:
The ‘C’ rating reflects Fitch’s view that a sovereign default is imminent.
Fitch said developments since Russia’s last downgrade on March 2 had further undermined the country’s willingness to pay down public debt.
He points to President Vladimir Putin’s decree last week that Russian creditors can use rubles to pay certain foreign currency debts, and the country’s central bank‘s restriction of certain transfers of ruble-denominated debt coupons.
The intensification of sanctions could also lead Moscow to default on its obligations, according to Fitch:
The new surge in sanctions and proposals that could limit energy trade increase the likelihood of a policy response from Russia that includes at least a selective nonpayment of its sovereign debt obligations.
The statement comes after the US and UK said they would ban Russian oil, as the economic response to the invasion of Ukraine continued to intensify.
Russia is due to make its next debt repayment on March 16 – although it would have a 30-day grace period to honor coupon payments.
Western sanctions, including banning Russia’s central bank from accessing foreign exchange reserves, prevented Putin from accessing much of the $630 billion war chest built up in foreign currency before the invasion.
A slew of major Western countries suspended operations in Russia yesterday, with Starbucks, Coca-Cola, Pepsi and McDonald’s joining in the post-war pullout in Ukraine.
Shell announced its intention to withdraw from Russian oil and gas and Unilever said it would stop importing and exporting its products with Russia:
European markets are expected to open higher, with the FTSE 100 on track to jump more than 1% at the open.
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