The U.S. Treasury Department announced yesterday that the sanctions waiver, whereby Russia could make payments on their sovereign debt to American investors, would not be extended. It expired this morning. TASS interviewed Kyle Shostak, the director and CEO of Navigator Principal Investors, to unravel this “man bites dog” story: The move will “effectively turn Russia’s liabilities to the category of default as it is commonly understood and interpreted by international rating agencies. This situation can be called nothing but enforcement of an artificial default, as Russia now has enough funds to service its external debt.”
As Shostak put it, Russia could still try to service the debt in various non-dollar currencies (e.g., euros, pounds, Swiss francs), however the sanctions regime applies to banks that might carry out such otherwise completely normal transactions. So, if “attempts to provide payments in foreign currencies are unsuccessful, the Russian Ministry of Finance will offer creditors [the opportunity] to open ruble accounts.” Then banks, and their countries, can choose sides in a deliberately-engineered chaotic world.
