You are currently viewing Von der Leyen says the Russian economy’s bankruptcy is a "a matter of time"

The President of the European Commission, Ursula von der Leyen, admitted this Sunday that the entry of Russia in default is a “matter of time” due to western sanctions imposed for having invaded ukraine. “The bankruptcy of the Russian state is just a matter of time,” von der Leyen told the German newspaper. Bild am Sonntag.

Von der Leyen said that sanctions were increasingly affecting the Russian economy, “week by week”, and that “exports of goods to Russia have fallen by 70%”. “Hundreds of large companies and thousands of specialists have left the country. the GDP [Produto Interno Bruto] in Russia, according to current forecasts, it will decrease by 11%,” said the German policy.

According to data from the Russian Ministry of Finance cited by the Russian agency TASS, Russia’s external public debt amounts to 59,500 million dollars (more than 55,000 million euros at the current exchange rate), corresponding to 20% of the public debt. In total, the Russian Federation has 15 active bond loans with maturities between 2022 and 2047.

In response to the sanctions, Russian President Vladimir Putin authorized the use of the national currency, the ruble, to pay debts in foreign currency to “non-friendly countries”, that is, those that imposed sanctions on Moscow.

According to the decree cited by TASS, debtor companies or the State itself can open an account with Russian banks in the name of a foreign creditor and transfer payments in rubles at the exchange rate of the Central Bank on the day of payment. Creditors from countries that have not imposed sanctions can receive payments in euros or dollars if the Russian debtor has special authorization to do so.

Russian Finance Minister Anton Siluanov acknowledged this week that the freezing of the Russian state’s foreign currency accounts, stemming from international sanctions, makes it difficult to meet debt obligations. “There are difficulties in meeting sovereign debt obligations solely due to the lack of access to our foreign currency accounts,” Siluanov said in a letter sent to his Brazilian counterpart, Paulo Guedes.

In the letter, published by the Brazilian newspaper The globe, Siluanov asked for Brazil’s diplomatic support with the International Monetary Fund (IMF), the World Bank and the G20 to avoid “attempts to discriminate in international financial institutions and multilateral forums”. “Almost half of the Russian Federation’s international reserves have been frozen, foreign trade transactions are blocked, including those with our partners in emerging market economies,” explained the Russian minister. Siluanov previously said that Russia would only pay off its foreign currency debt if its overseas accounts were unfrozen.

A country is considered in default when it is not able to fulfill the commitments it has made with creditors.

On April 9, rating agency S&P Global Ratings lowered Russia’s rating for its foreign currency payments to the “selective default” level, after Moscow resorted to rubles to pay off a dollar-denominated debt.

In a recent interview with a Russian newspaper, Siluanov said that Russia would go to court if it was found to be in default by the West, although he did not specify which legal instance he was referring to.

following the Ukraine invasion, on February 24, Russia was subject to economic and financial sanctions by the EU and countries such as the United States, the United Kingdom, Japan or the traditionally neutral Switzerland.

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