Russian default will not be Russia's fault

When the West responded to the Russian military operation in Ukraine with brutal sanctions, everybody said a Russian default was imminent. Russia's foreign exchange earnings would collapse, the ruble would go through the floor, the Russian economy would be brought to its knees and Russia would renege on its sovereign dues.

Nothing like that has happened. Russia's export earnings from oil and gas have boomed as  prices have shot up and the West has been unable to avoid buying Russian oil and gas. The Russian ruble has turned out to the best performing currency in recent weeks.

If a Russian default happens, it will not be because Russia does not have the means to repay debt but because sanctions will not allow Russian payments on debt to go through the international system. Until now, servicing of debt payments was exempt from sanctions but the US has now allowed the exemption to expire. Russia has wired a $ 100 million payment that was due but it's not getting cleared. Too bad for the bond holders.

In the case of many of the borrowings from abroad, there is a clause that allows Russia to repay in ruble. For that, bondholders will have to open ruble accounts with Russian banks. That may also not be possible under sanctions. In that event, a Russian default will happen. Perhaps for the first time, a default will happen not because the borrower can't pay but because the lender can't accept the payment! It certainly won't be Russia's fault. 

By the way, whatever happened to the financial crash in China that was supposed to happen after the Evergrande default? No crash has happened, the news of the crash has disappeared from the media.  

Ukraine: what exactly is going on?

Western governments and the Western media have been screaming for over a week that a Russian attack on Ukraine is imminent. Russia denies any plans to invade Ukraine. The President of Ukraine has asked Western governments to tone down hysteria over a Russian invasion: he doesn't think one is imminent. 

So, what exactly is going on?

Well, it is fair to say that Russia has no interest in absorbing Ukraine. It was interested in maintaining its access to the Black Sea. That objective was achieved when the Crimea was absorbed into Russia. Putin insists that Russia's interest in Ukraine is limited to ensuring it does not become a base for NATO missiles by becoming part of NATO.

Ukraine and some Western governments have indicated that there is little chance of Ukraine becoming a member of NATO. That requires the unanimous approval of all NATO countries. There is no way that such unanimity will be achieved in the foreseeable future. No European country, other than the UK, would like to incur the wrath of Russia in the cause of making Ukraine  a member of NATO- it's just not worth the trouble. What Ukraine and the West are reluctant to do is to concede Putin's demand for iron-clad guarantees that Ukraine will never become a member of NATO. 

If Ukraine becoming a member of NATO is a non-issue for now, why has Russia massed troops on the border with Ukraine? A plausible reason could be that it fears Ukraine will allow itself to be used by the West to launch a major assault on Donbas whose Russian population has been facing attacks from Ukraine for quite some time. Russia cannot be passive spectator to such an assault. It is, therefore, keeping its troops in readiness.

Why would the West want Ukraine to provoke Russia? Well, the speculation is that the US wants an excuse to get the West to impose sanctions that would include a ban on the Nord Stream 2 project that involves the supply of Russian gas to Germany. The US does not want Europe to be depend on Russia for its energy. Germany has been reluctant to buy the US line because it can use Russian gas supplies. Creating a ruckus over any Russian action against Ukraine would provide the basis for sanctions that cover Nord Stream 2. 

Another American objective could be tying down Russia in its immediate vicinity so that it does not attempt far away adventures such as the one in Syria. 

Putin has made it clear that he will not allow the countries in its periphery to be used a base for missiles that threaten Russia. He has declared that he has no interest in re-creating the erstwhile Soviet Union. If the West cannot accept this position, the world is in for serious trouble.