Putin’s faltering economy goes into freefall as railways COLLAPSE under sanctions

Joe Biden says sanctions have ‘crippled’ Russian economy

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The EMEA Credit Derivatives Determinations Committee (CDDC), whose members include some of the world’s biggest investment banks, said a “failure to pay” credit event has occurred on Swiss franc loan participation notes linked to the company. If Russia does indeed default on this, it will mark the first time this has happened since the Bolshevik Revolution in 1917. This comes after Russian Railways, which operates both cargo and passenger trains along thousands of miles of railway, failed to make a payment to investors and a 10-day grace period expired.

The loan participation notes due in 2026 were issued by RZD Capital to finance a loan of £206million ($268million) to the state-owned firm.

Global financial giants Bank of America, Goldman Sachs International and JPMorgan Chase Bank were just some of the committee members who voted “yes” to the question on whether a failure to pay event occurred on these assets.

Financial and economic experts believe this could be a test case on whether a solvent issuer that could not physically make the payment due to sanctions is considered in default.

A source, speaking on condition of anonymity, told Reuters: “Apparently CDDC says yes, and probably means it will conclude something similar with the Russian sovereign trying to pay a USD coupon – but failing to.”

UBS AG, the notes’ paying agent, declined to comment.

Russian Railways insisted it tried to make interest payments due on March 14.

But according to an official notice posted by the SIX Swiss Exchange and referenced in the request to the committee, the state-owned company claimed it had been unable to do so due to “legal and regulatory compliance obligations within the correspondent banking network”.

Russia’s Finance Minister Anton Siluanov has previously warned the country will begin legal action if the West tried to force it to default on its sovereign debt.

The crisis-hit economy has come under surging pressure after being crippled by Western sanctions, raising questions about many bonds issued by Russian corporations possibly being defaulted.

As a result, this has further raised the possibility of substantial write-offs by Western lenders to Russia.

Last week, UK Foreign Secretary Liz Truss announced further sanctions on Russia, aimed at cutting off key sectors of the Russian economy and ending Britain’s dependency on Russian energy.

The fifth package of measures imposed asset freezes on Sberbank – Russia’s largest bank – as well as the Credit Bank of Moscow.

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There is an outright ban on all new outward investment to Russia from the UK, which in 2020 has been worth over £11billion.

By the end of this year, the UK will also end all dependency on Russian coal and oil, and end imports of gas as soon as possible thereafter.

A further eight Russian active in these industries, which the Foreign, Commonwealth & Development Office said “Putin uses to prop up his war economy”.

In a defiant message, Ms Truss said: “Today, we are stepping up our campaign to bring Putin’s appalling war to an end with some of our toughest sanctions yet.

“Our latest wave of measures will bring an end to the UK’s imports of Russian energy and sanction yet more individuals and businesses, decimating Putin’s war machine.

“Together with our allies, we are showing the Russian elite that they cannot wash their hands of the atrocities committed on Putin’s orders. We will not rest until Ukraine prevails.”

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