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Oil and gas revenues give Russia’s economy $3.4bn cushion

Russia has bolstered the fund, which is hurting its sanctions-hit economy with additional $ 3.4 billion in oil and gas revenues thanks to rising energy prices since the start of the war with Ukraine, as it approaches its first debt default since 1998.

Moscow announced on Sunday that it would devote an additional 273.4 billion Rbs ($ 3.4 billion) to its rainy days fund, of which R27271.6 billion comes from oil and gas revenues it received in the first quarter of the year.

The extra money “will be used, among other things, to implement measures aimed at ensuring economic stability in the context of external sanctions,” the government said. The Russian economy is expected to shrink by 10% this year, according to the consensus forecasts of economists.

Despite this, gains on exports of goods and severe capital controls helped Moscow stabilize its currency and prevent a financial collapse in the face of severe economic sanctions imposed by Western countries and their partners.

So far, Russia’s economy has benefited from oil and gas revenues and draconian capital controls, which are blocking most foreign traders from leaving their investments.

However, S&P Global Ratings over the weekend downgraded Russia’s credit rating to “selective default” after Moscow announced it would make payments on the last tranche of its foreign-denominated ruble in dollars.

Russia has continued to make payments on its dollar-denominated bonds since the beginning of the invasion, which confuses many investors’ expectations that Western sanctions and supervision of the Russian currency will lead the country to its first foreign currency default since 1998.

but Last WeekMoscow was to make a $ 84 million coupon payment and a $ 552 million repayment of a repayable bond, for which it offered a payment in rubles rather than dollars after U.S. authorities blocked U.S. banks from processing the payment.

Moscow has a 30-day grace period to transfer cash to investors before it defaults, but S&P said it is unlikely to happen.

“At the moment we do not expect investors to be able to convert the ruble payments into dollars equal to the amounts originally due, or for the government to convert these payments within a 30-day grace period,” S&P said in a comment.

“Sanctions on Russia are likely to be further intensified in the coming weeks, undermining Russia’s willingness and technical capabilities to honor the terms and conditions of its commitments to foreign debt holders,” they added.

The U.S. last week imposed its most severe level of sanctions on Sberbank, Russia’s largest financial institution, and Alpha Bank, the country’s largest private bank, preventing lenders from making deals with any American institutions or individuals. It also banned all new U.S. investments. in Russia.

The EU also approved last weekend a fifth package of sanctions, including a ban on imports of Russian coal.

Default is considered selective when it affects some international refunds but not others.

Russia has said that any default – if it occurs – will be “artificial” because it is able to pay, but if its foreign balances remain in sanctions, it will pay the payments in rubles.

The rating agency Fitch warned last month that an attempt to make dollar interest payments in Russian currency would indicate “a default or default-like process has begun.”

Another report by Valentina Rumi in London

Oil and gas revenues give Russia’s economy $3.4bn cushion Source link Oil and gas revenues give Russia’s economy $3.4bn cushion

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