May 29, 2022
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Andrey Bunich: “The Russian Federation may stop paying its debts, but not before the oligarchs take all the money out”

In the photo: economist Andrei Bunich

In the photo: economist Andrei Bunich

The US Treasury has not renewed a license allowing Western investors to receive debt payments on Russian sovereign bonds. Russia, in turn, is making desperate attempts to keep paying. And those lucky enough to stock up on Russian stocks and bonds are nervous about a default. That is, everything is in order with the money to pay off debt obligations in Russia – they are! And if the US authorities extended the expired license allowing our country to service dollar obligations, there would be no problems with payments. Now our Ministry of Finance has to spin like a snake in order to still pay off our Western partners on time.

In Russia, dollar-denominated sovereign bonds are circulating on the market for more than 30 billion dollars. And this currency is now out of favor with us. In principle, we can also pay in rubles, and the recipients will convert them into whatever they please.

It seems to be quite legal: in the documentation of all Russian issues, the “Reimbursement in another currency” (Currency Indemnity) condition is found, and it theoretically provides an opportunity for payments in rubles without reason to declare a default. It is independent of the other condition “Alternative Payment Currency”, which is specified in securities issued since 2018, and allows legal payments in rubles if something, such as sanctions, prevents payment in the original currency. RBC wrote about all these possibilities.

It is clear that the global financial system is controlled by the Treasury and the US Federal Reserve, it is all geared towards the interests of Uncle Sam. And the tricks with the issuance of the ill-fated license indicate that the United States continues to put pressure on Russia, and there is no reason to believe that they will refuse this in the foreseeable future, he believes Andrey Bunich.

– Legal loopholes for the Russian Ministry of Finance still remain. But it is only a matter of time before it is announced that Russia is unable to pay its debts. This is exactly what the Americans are after. Because then a default will occur, and after it – it will cover a cross-default on all Russian debt obligations OK.).

By the way, we don’t have much debt. And they are fully covered by those 300 billion gold and foreign exchange reserves that were stolen from us. By the way, it is possible that we owe even less, because so far we continue to pay regularly. But a cross-default may spread to the commercial debts of corporate and oligarchic structures, and, most importantly, to the debts of their various official and semi-official subsidiaries, of which a great many have bred. Apparently, the Americans want to block all this. Then a commercial default will occur, which will become a trigger that can bring down the global financial markets (a corporate default is not associated with the obligations of the country, but with the obligations of individual companies, in fact, this is the bankruptcy of enterprises – OK.). But the United States will habitually shift the responsibility for this to Russia. Although the cause of the crisis is the adventurous long-term policy of central banks led by the US Federal Reserve. And everyone knows it.

There is another important point: if there is a commercial default, then the Americans will be able to take under the cap all the subsidiary oligarchic structures, including semi-official ones.

“SP”: – That’s just not clear, Russia so wants to pay? After all, the Bolsheviks refused to pay the debts of tsarist Russia at one time.

– In principle, we could declare that we will not pay anything until our gold and foreign exchange reserves are unlocked. Because it turns out a paradoxical situation: Russia is eager to pay, but it is not allowed. It’s as if you borrowed a small amount from a bandit before payday, and he took and seized your apartment. And you, after you have been robbed, realizing that the property will not be returned back, you still try to return the borrowed money. This is unnatural! So the desire of Russia to be holier than the Pope in terms of common sense is not entirely clear. In my opinion, this is done by the Ministry of Finance in the interests of certain oligarchic groups.

What is called the total external debt of Russia is completely balanced by the blocking of our gold and foreign exchange reserves. They do not return them to us, we refuse to pay. And we part. But, we have already talked about the numerous “daughters” that have spawned many operations, including those secured by assets registered in jurisdictions that are unfriendly to us: in Cyprus, in the Netherlands, and wherever they are. And there are big turnovers! Our oligarchs took out big loans, bought shares, real estate…

There are sums that are comparable to frozen gold reserves. Operations were conducted on the security of the shares of the largest Russian enterprises and on the security of supplies. And since they brought it all back together with the largest Western banks, these banks have all the information where everything is, and all this can be withdrawn very quickly. Western banks, by the way, are not interested in it coming to this, because they feed themselves from all these transactions.

I believe that the game is now on: the Russian Ministry of Finance is playing for time and paying, and the oligarchs are actively withdrawing money to Dubai, Israel, and Turkey. These countries in the current situation, by the way, benefit a lot.

The expert believes that cross-defaults and blocking of assets are unlikely to be avoided. But by the time this begins to happen, a significant part of the funds will be withdrawn from hostile jurisdictions.

And yet, the Ministry of Finance explains its actions as follows: we pay our debts, because what we pay is less than the profit we receive from exports. If we stop, exports will suffer.

Andrei Bunich disagrees with this logic:

— We see that, for example, gas exports to Europe are more beneficial than to Russia. And Europe will take as much gas as it needs, regardless of whether Russia pays its debts or not. These issues are regulated differently. Same for oil and other positions. So we tried not to sell fertilizers – so immediately the screech rose. And look what happens to the supply of wheat! If there is something that the Europeans can give up in order to put pressure on Russia, then they do not really need it. But in this case, we should first figure out if we ourselves need it. After all, for decades, the structure of foreign trade has been mutilated in our country. We very often sell what we ourselves need, and we do not buy what we really need, but what they really want to sell us. There are a lot of positions for which we are not so interested in selling: aluminum, titanium, nickel, nuclear fuel … It’s time to fix it all. And if we had taken a more principled position, we would have done it faster. And by dragging out time, we only strengthen the collective West in the belief that it can put pressure on us.

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