IMF Managing Director Kristallina Georgieva, on “Face the Nation” March 13, estimated U.S. and European banks’ total exposure to Russian debt (sovereign and corporate) at $120 billion. She called the exposure “not systemically relevant.” IMF officials and executives of the International Institute of Finance—the biggest banks’ lobby—think that Russia’s payments of sovereign debt in rubles starting March 16, though not accepted, will be under control because the International Swaps and Derivatives Association will not call them defaults for at least 30 days.
Interestingly, Russian Finance Minister Anton Siluanov stated today that Russia will pay the coupon due March 16, for more than $100 million on a Eurobond issue, with Chinese yuan. Then if that is not accepted, with rubles, Siluanov said. Russia will argue that the debt coupon has been paid on time and that Russia’s seized hard currency reserves are its guarantee.
The yuan is quickly becoming a currency in more general use in Russia. RT, when its website was briefly accessible March 13, was reporting that large numbers of Russian companies and individuals are opening yuan (renminbi) accounts in Russian banks. The Russian banks pay 8% interest on renminbi time deposits, similar to the interest on dollar or euro accounts, indicating both the authorities and the population consider it a stable store of value as well as a means of payment. Ruble time deposits currently bear 21% interest or more.
