ECF Bans Russians

[Chris Rice]

I'm no expert, but, as an indicator of economic health, I would imagine defaulting would be a negative development for Russia. Won't they also find it harder to borrow in future? Of course, it would be bad news for bond holders, as Nick points out.

Kamala Harris speaking in Poland just said that Russia's credit rating has now been lowered to "junk" status, so clearly the US feels it matters as well.

[NickFaulks]

I'm no expert, but, as an indicator of economic health, I would imagine defaulting would be a negative development for Russia. Won't they also find it harder to borrow in future?

This is a very Western way of looking at things, and long experience of nations such as Argentina suggests otherwise. Whenever there is a big default, Western banks lose a load of money ( although they have accounting methods which conceal this ), it ends up in the pockets of wealthy local players and then there is a reset and the circus resumes.

In any case, the biggest reason for new loans is to service and repay old debt. If you aren't going to do that ( and how can you if your assets are frozen? ) you don't really need the new loans. Putin has spent the past decade making Russia self sufficient in most vital resources, and trusts the people not to complain too much about their loss of American burgers and fizzy drinks and Italian handbags.

[NickFaulks]

Kamala Harris speaking in Poland just said that Russia's credit rating has now been lowered to "junk" status, so clearly the US feels it matters as well.

The US Government can crash anyone's credit rating simply by telling their rating agencies to do that, but if the Russians say "so what?", then so what? It really doesn't matter that Kamala Harris declares it to be a great victory.

[Chris Rice]

Kamala Harris speaking in Poland just said that Russia's credit rating has now been lowered to "junk" status, so clearly the US feels it matters as well.

The US Government can crash anyone's credit rating simply by telling their rating agencies to do that, but if the Russians say "so what?", then so what? It really doesn't matter that Kamala Harris declares it to be a great victory.

This has happened before to Russia but not on such a scale. If it can't service it's sovereign debt and this is seemingly becoming inevitable it will go bankrupt and end up in the same situation as Venezuela. The forecast is they will default on their debt on April 15. Russia will of course not pay back loans but neither will any country invest in Russia so both it's domestic and foreign currency markets will be toast. This is going to affect China and India as well for various reasons. I'm not sure what your comments regarding Russia's resiliency to withstand these circumstances are based on and assume you just made them up.

[NickFaulks]

I'm not sure what your comments regarding Russia's resiliency to withstand these circumstances are based on and assume you just made them up.

You can assume what you like and be as offensive as you like. Everyone should do what they're good at.

What does Russia need to import - I mean really need, not just handbags and financial services? The most obvious thing is food, and Putin is presumably relying on Ukraine for that.

[Jonathan Rogers]

What does Russia need to import - I mean really need, not just handbags and financial services? The most obvious thing is food, and Putin is presumably relying on Ukraine for that.

They may need fresh supplies of metal for those legendary tractors in the Ukraine

[NickFaulks]

They may need fresh supplies of metal for those legendary tractors in the Ukraine

Not so, they are big exporters there. They do re-import some metal in the form of specialist added-value products, but that is exactly what they have been working on bringing in-house.

They are the dominant producer of nickel, and you may have noticed that the London market is in such a mess that it hasn't even opened for two days, as traders count their losses.

While I hope, and in fact believe, that Putin's Ukraine venture will end badly for him, it is ridiculous not to admit he has gone into it much better prepared for a two-way blockade than we are.

[Mick Norris]

I assumed Jonathan was referring to the book

[NickFaulks]

I assumed Jonathan was referring to the book

Of course he was, but I assumed he was also making a serious point.

[Joseph Conlon]

Can someone who understands a bit more explains about the default and it’s significance? What I had read was that pre-invasion Russia had built up very large foreign currency reserves and was running a budget surplus by suppressing domestic spending - and that with sanctions, these foreign currency reserves were effectively frozen and for the moment unusable. So what is the significance of a default? Being banned from paying seems a different situation from countries which really did run out of cash (unless I have the facts wrong on the currency reserves)

[Chris Goodall]

Can someone who understands a bit more explains about the default and it’s significance? What I had read was that pre-invasion Russia had built up very large foreign currency reserves and was running a budget surplus by suppressing domestic spending - and that with sanctions, these foreign currency reserves were effectively frozen and for the moment unusable. So what is the significance of a default? Being banned from paying seems a different situation from countries which really did run out of cash (unless I have the facts wrong on the currency reserves)

I think Nick is partly right - sovereign defaults are over-hyped in most cases, but the cases where they're not over-hyped look like Russia.

Think of government bonds as the government paying you to hold a ticking bomb for them for a year. If the bomb is ticking very quietly, you won't be worried about it exploding, so the government can pay you next to nothing to hold it. If it sounds like it's about to explode, all the money they have may not convince you to take it off their hands.

But that whole negotiation happens before the bomb explodes (the sovereign default). After it's exploded, the market may decide not to trust that government's bombs for a while - but equally, it might decide that the government is now in better shape than it was previously, and that the next few bombs will have a lower chance of exploding. That happened with Iceland. After a few bond holders got their fingers burned, Iceland's cost of borrowing quickly returned to normal. People saw that there was nothing fundamentally wrong with Iceland's ability to pay its debts - the crisis was an artificial one created by the banking system. As was Argentina's crisis.

The same may not be true of Russia. If the sanctions continue and it gets tricky for them to export hydrocarbons, there may be a prolonged period where no-one trusts their bombs not to explode - even if none have exploded yet. That could mean that the government can't pay the army this month's salaries until this month's tax revenues arrive in its account, because it's too expensive to get a short-term loan to bridge the gap.

Chris, if we worried too much about Russian reaction, we would never take any measures in response to their aggression. The West has imposed a wide range of sanctions, with various objectives. The economic sanctions are hitting the Russian economy hard: companies are avoiding operating in Russia, the ruble has been slaughtered, stockmarkets are closed and Russia seems about to default on debts ...

I would never suggest worrying too much. Too much is the precise amount that is excessive. We have indeed applied a range of sanctions with clear economic effects. Banning Russian-composed chess problems, which is what we were talking about, has no economic effect. It's a psychological sanction. We worry about the Russians' reaction because getting a certain reaction out of the Russians is the only reason to do it.

[Mick Norris]

Pete Doggers Ukrainian Chess Players In Times Of War has been updated

Almost all of the Ukrainian players Chess.com spoke to are in agreement about one thing: that Arkady Dvorkovich, a former top politician in the Russian government, should resign as FIDE President.

Most Ukrainians are also in favor of banning Russian and Belarusian players, i.e. not even allowing them to play individual tournaments under the FIDE flag, as FIDE and the European Chess Union have decided.

"We must ask for a ban of Russian and Belarusian players," says Matlak. "The Russian tricolor right now equals support for Putin. I know of the letter where 44 players speak out against the war, but there are about two thousand titled players in Russia. 44 is a miserable number."

"I have good relations with many Russian players," said Kryvoruchko. "I saw the letter with 44 signatories, I saw GM Alexander Grischuk's speech. On the other hand, if they earn money by playing, they pay taxes and so they'll pay for the war."

"Men in Ukraine cannot leave their country, so they cannot play competitions due to a war with Russia. So, why Russians can play?" asks Moiseenko. "I have Russian friends but they should not be able to play tournaments during this war. There should be a clear rule. For example, we cannot play the European championship now. Why can they? Let's not allow them as long as their country is attacking us."

Eljanov feels that Russian players who are in favor of the war should be penalized strongly, but he is not sure about a ban for all. "Russian and Belarusian teams should be suspended for some time, but I am not sure about individual players. I don't know what is the best solution. In the German Bundesliga, Russian players can play only if they take a stand and sign some public letter against the war."

chess24

Chess great Vasyl Ivanchuk has made his position clear on the war in Ukraine by echoing demands for a blanket ban on all Russian players and the resignation of FIDE President Arkady Dvorkovich.

The 52-year-old Ukrainian, nicknamed Chucky, put his name to a joint letter featuring his country's top grandmasters that repeated a series of calls for a more hardline approach.

Until now, Ivanchuk had not publicly indicated his thoughts on the invasion of his country.

[Chris Rice]

Today is the day the Russians are supposed to make the $117 million payment on their Eurobond to stop the sovereign debt default which would be ruinous for their economy. The Russians say they have paid it but the twist is they have used their frozen assets to do it which they can't do at the moment. The Russians now say the ball is in the American's court. It's complicated. There is a $2 billion debt repayment due at the start of April so it will be significant if the payment today is allowed to go through or not. Here's a CNN article which explains it in more detail.

[Matt Bridgeman]

Putin’s shadow seems to be creeping in the direction of Moldova, which is not NATO or EU, but is supposed to be neutral.

[NickFaulks]

Today is the day the Russians are supposed to make the $117 million payment on their Eurobond to stop the sovereign debt default which would be ruinous for their economy.

So if I owe you a great deal of money and decide not to pay it back, that is bad news for me? I think it is bad news for you.

There is a confidence trick going on here. If everyone says often enough and loudly enough that Russia will be mortally damaged by not handing over its money, it must be true. But it isn't.