‘Our sanctions are working’ Putin’s economy crumbles as Liz Truss hails British power

Liz Truss calls for a 'tough new wave of sanctions' against Russia

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It comes as Russia has defaulted on its foreign debt as the Kremlin offered bondholders payments in Rubles rather than US dollars, according to credit ratings agency S&P. S&P said in a note on Friday that Russia attempted to pay in Rubles for two dollar-denominated bonds.

This is likely to be a selective default, according to the agency, as investors are unlikely to be able to convert the Rubles into “dollars equivalent to the originally due amounts”.

UK Foreign Secretary Liz Truss commented on the unfolding situation to her 216 thousand Twitter followers: “Our unprecedented package of sanctions is working.”

According to S&P, a selective default occurs when a company or country has defaulted on a specific obligation but not its entire debt.

Russia now has a grace period of 30 days which started on April 4 to make the payments but S&P argue that it is unlikely they will be paid in dollars due to Western sanctions.

According to the agency, the sanctions undermine Russia’s “willingness and technical abilities to honour the terms and conditions” of its obligations.

A full foreign currency default would be Russia’s first in more than a century since shortly after the 1917 Bolshevik revolution.

Russia is currently unable to access $315 billion of its foreign currency reserves due to Western sanctions following the invasion of Ukraine.

Until last week the US allowed Russia to use some of its frozen assets to pay back investors in dollars. 

However, the US Treasury has since blocked Moscow from accessing its reserves in American banks.

Russian Finance Minister Anton Siluanov told Russian newspaper Izvestia on Monday that the Kremlin was preparing legal action on the matter.

He said: “We will sue, because we undertook all necessary action so that investors would receive their payments.

“We will show the court proof of our payments, to confirm our efforts to pay in Rubles, just as we did in foreign currency. It won’t be a simple process.” 

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Kremlin spokesman Dmitry Peskov said in a press conference last week that any default would be “artificial” because Russia has the dollars to pay investors but is prevented from accessing them.

He said: “There are no grounds for a real default. Not even close.”

Moscow has artificially propped up the Ruble after it fell 40 percent in value following the invasion.

Measures include increasing interest rates by 20 percent and insisting that exporters swap most of their foreign currency revenues for Rubles.

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