Posted on 03/15/2022 7:27:49 PM PDT by marcusmaximus
LONDON- The economic cost of Russia's assault on Ukraine was fully exposed on Wednesday as Vladimir Putin's sanctions-ravaged government teetered on the brink of its first international debt default since the Bolshevik revolution.
Moscow was due to pay $117 million in interest on two dollar-denominated sovereign bonds it had sold back in 2013. But the limits it now faces making payments, and talk from the Kremlin that it might pay in roubles - triggering a default anyway - meant even veteran investors were left guessing at what might happen.
One described it as the most closely watched government debt payment since Greece's default at the height of the euro zone crisis. Others said an emergency 'grace period' that allows Russia another 30 days to make the payment could drag the saga out.
"The thing about defaults is that they are never clear cut and this is no exception," said Pictet emerging market portfolio manager Guido Chamorro.
"There is a grace period, so we are not really going to know whether this is a default or not until April 15," he said referring to the situation if no coupon payment is made. "Anything could happen in the grace period."
A Russian government debt default was unthinkable until what Putin called a "special military operation" in Ukraine began in late February.
(Excerpt) Read more at money.usnews.com ...
Like Putin gives a rip.
Another dramatic story to make Joe Biden look good.
Biden is not looking good.
It’s all about making his response to Ukraine look like its working and achieving results when it means nothing.
Ukraine is being forced in the end to cut a deal with Putin and Russia and Biden wants to find some way to claim victory in the face of that endgame.
“Moscow was due to pay $117 million in interest”
I suspect that if they wanted to pay the above, they could find the funds in the $300B still available to them.
Biden can try to take credit but it’s not going to work.
The default date is 3/16, so we’ll see, either way.
“Ukraine is being forced in the end to cut a deal with Putin and Russia and Biden wants to find some way to claim victory in the face of that endgame.”
—
Russia will let Z have some face-saving in the end mix, too.
But I suspect the longer it takes Z to surrender (it’ll be a rose by any other name instead of “surrender”) the less face they’ll let him save.
Biden did that. You know he’s going to brag about taking down Corn Popov.
Russia is getting their asses kicked by the Ukrainians tonight in a counteroffensive northwest of Kiev. And Putin got cold feet today on his planned Odessa marine landing.
Biden took more money from the mayor of Moscow than he did from Burisma. Putin owns Biden’s butt.
When P and Z ultimately come to terms with each other
will either of them let B save some face?
https://freerepublic.com/focus/f-news/4047094/posts
As of today, it appears some sanctions have been lifted by Biden for Russia and Iran. Plus China is buying heavy from Russian energy and mineral companies. Maybe they aren’t going into default. Read the article.
Like Putin gives Stalin’s ass about it.
A lot happening tomorrow - this possible default, Zelensky addresses Congress (9AM Eastern time - must watch TV), and Sleepy Joe will likely respond with an aid package out of the recently approved appropriation (probably an iron mountain of Javelins and Stingers).
Turn him over to a collection agency.
“Russia is getting their asses kicked by the Ukrainians tonight in a counteroffensive northwest of Kiev”
—
Searched the news - nothing about this. This would be getting live coverage if it were so.
Nada on the Fox live news feed:
https://www.youtube.com/watch?v=xBNxDEMOEWM
(Though they are talking about Ukraine taking a pounding and Ukrainians fleeing the country)
No bombs bursting in air or rocket’s red glare from the Kiev cams:
https://www.youtube.com/watch?v=iZebYm-nenY
Ukraine’s first major offensive of the war.
Also counter-attacked in Luhansk region today and broke through the Russian lines
And something going on in the south, too
I would not count out Russia just yet.
Climbing the Escalation Ladder in the Economic War With Russia... Here’s the Nuclear Option
By: Nick Giambruno
econwar.jpg
The escalation ladder is a concept to describe how the severity of a military conflict can increase. At the very top of the escalation ladder is all-out nuclear war.
While there are numerous countries with nuclear weapons, Russia and China are the only ones with sophisticated enough arsenals to go toe-to-toe with the US up to the top of the escalation ladder.
In other words, the US can’t obtain escalation dominance against Russia or China because they can match each escalation up to all-out nuclear war—the very top of the ladder. For this reason, these countries are deterred from getting into a kinetic conflict with one another.
It’s also why the US military doesn’t hesitate to bomb countries like Libya, Iraq, Syria, or Afghanistan. It has little to fear because it knows these countries can’t climb very high in the escalation ladder.
This concept is well-understood in military conflicts.
However, the same dynamic exists in an economic war, and it’s far less understood by governments (and investors). That’s why neither the US nor Russia are not deterred and are climbing up the economic escalation ladder and hurdling towards an increasingly imminent catastrophe.
The Economic War Escalates
In the wake of Russia’s invasion of Ukraine, the US government and EU have launched an unprecedented economic war… with seeming little thought on how it all ends.
Russia is not a tiny, feeble country that can’t punch back.Even though many people don’t realize it, Russia can escalate to the top of the economic escalation ladder. Here’s why…
Russia is the world’s largest exporter of natural gas, lumber, wheat, fertilizer, and palladium (a crucial component in cars). It is the second-largest exporter of oil and aluminum and the third-largest exporter of nickel and coal. Russia is a major producer and processor of uranium for nuclear power plants. Enriched uranium from Russia and its allies provides electricity to 20% of the homes in the US.
Aside from China, Russia produces more gold than any other country, accounting for more than 10% of global production. These are just a handful of examples. There are many strategic commodities that Russia dominates.In short, Russia is not just an oil and gas powerhouse but a commodity powerhouse.
Europe cannot survive without Russian commodities.
Taking Russian commodities off of global markets would cause an across-the-board price shock that would decimate financial markets, banks, and practically every industry. Moreover, Russia also has an economic nuclear option that could blow up the Western financial system overnight.
In short, Russia has powerful cards to play. Just like in a kinetic war, Russia can match US moves to escalate an economic war to the top of the escalation ladder. But unlike a kinetic war, neither side is deterred. On the contrary, it seems all but inevitable that things will escalate from here, which makes the situation incredibly dangerous.
Where Are We Now?
The US has sanctioned the Russian central bank, making it illegal for any American to engage with it, the finance ministry, or the national wealth fund.
The US and European governments froze the US dollar and euro reserves of Russia—the accumulated savings of the nation—worth around $300 billion.
Certain Russian banks have been kicked out of SWIFT, the system to send international wire transfers.A stampede of Western companies have left Russia and are banning average Russian citizens from using their platforms.
Visa, MasterCard, and American Express have cut off Russia from their networks.
The US government banned all imports of Russian oil. In return, Russia has matched these moves with defensive maneuvers and escalations of its own.
Moscow has banned the export of rocket engines to the US, with an official saying, “In a situation like this we can’t supply the United States with our world’s best rocket engines. Let them fly on something else, their “
Broomsticks.”
Russia and China have live alternatives to SWIFT to facilitate international financial transactions, which limits the effect of being kicked out of SWIFT.
Russian banks started issuing credit and debit cards linked to China’s global payment processing network UnionPay.
Russia has announced, or already is, doing business with China, India, Iran, Turkey, and other countries in local currencies instead of the US dollar, neutralizing much of the effect of sanctions.In perhaps the most significant escalatory move, the Russian government has allowed all external debt obtained from unfriendly countries—estimated to be over $400 billion— to be redenominated in rubles
As a result, instead of paying back creditors in the US and Europe in dollars and euros at Western banks, Russian companies can now repay their external debts by depositing rubles on their creditor’s behalf in Russian banks, which are inaccessible to them because of sanctions.This move forces the US and EU to either ease sanctions so that the estimated $400 billion in external debt can be repaid or give massive losses to Western banks and other creditors.
So, that’s where things stand now.
It’s worth noting that Europe is still paying for Russian energy, and Moscow is still delivering it. Nonetheless, Russia and the US are climbing the economic escalation ladder, with neither side showing any sign of slowing down. However, we are still several destructive steps away from the top.
What Comes Next
Putin recently announced a forthcoming ban on exports of certain commodities to certain unfriendly countries, with details coming soon. Given Russia’s dominance in the commodity markets, such a move will be significant. A logical next step Russia could take if the US and EU increase their sanctions would be to force Europe to pay for its energy imports in rubles.
European buyers would have to first buy rubles with their euros and use them to pay for Russian gas, oil, and other exports. Such a move would neutralize the entire sanctions regime because it would force Europeans to deal with the sanctioned Russian central bank or get cut off from crucial commodities. The Europeans have no alternative to Russian energy and would have no choice but to comply.
Moscow could implement its economic nuclear option if the US really pushes Russia to the point where it has nothing left to lose. That would be demanding payment for oil and other commodities in gold. Since Russia is such a dominant player in the commodity markets, it could dictate this.
Such a move would send gold skyrocketing and blow up the entire Western financial system overnight. Moreover, the dollar and euro would likely suffer an enormous loss in purchasing power as commodities would be repriced in gold.
That’s Russia’s financial nuclear option, and if the US continues up the escalation ladder, this is where it will ultimately lead. With neither side backing down, escalation appears inevitable.
That means we are likely on the cusp of a historic financial earthquake…
One that could alter that direction of the US forever and mark the biggest economic event of our lifetimes. Yet few people are aware of what is happening.
And even fewer know how to prepare.
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