Russia may be on Brink of Payment Default in One Fortnight as NATO Isolation Hurts

Russia may be on the verge of default. The Credit Derivatives Determinations Committee—which includes Goldman Sachs, Barclays and JPMorgan—said Wednesday that a “potential failure-to-pay” event occurred for credit-default swaps when Russia paid rubles after foreign banks declined to process U.S. currency transfers. If Russia doesn’t pay up in dollars by the time its grace period expires on May 4, it would be the country’s first default on external debt in more than a century. Holders of the swaps could then start the process of getting paid on contracts covering about $40 billion of debt.

This potential financial calamity (for Russia) is of course tied to Vladimir Putin’s bloody war on Ukraine and the subsequent storm of sanctions that’s rained down upon him. Some eight weeks after he sent troops across his southern border, Putin has failed to take Kyiv and reportedly lost thousands of soldiers and untold amounts of equipment. Now a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war. They believe the invasion was a catastrophic mistake that will set the country back for years, if not decades.

But most Russians (fear of voicing dissent notwithstanding) tell pollsters they support Putin’s war, one in which thousands of civilians have likely been killed through seemingly indiscriminate bombing and alleged mass executions. As Russian forces now move on the Donbas, Moscow is seeking to dissuade NATO from increasing its flow of weapons. On Tuesday, Putin deputy Sergei Lavrov said Russia was against using nuclear weapons in Ukraine, but failed to give a direct answer about whether Putin might use them anyway. And on Wednesday, Russia tested a new nuclear-capable intercontinental ballistic missile, an event Putin used to issue yet another thinly veiled threat against NATO.

In its new assault in Ukraine’s east, Russia has yet to gain significant ground, Ukraine officials contend, though surrounded defenders in the blasted port city of Mariupol have warned they are close to the end. But while Russia seeks to consolidate gains along the Sea of Azov, the potential expansion of NATO along its northern border is getting closer to reality. Finland’s parliament began debate on policy changes that may pave the way for a bid to join the alliance. Putin still has friends in Beijing, at least: China said it will continue to strengthen its strategic ties with the Kremlin.

Israel’s central bank has decided to add the Chinese yuan to three other currencies in a stockpile that last year exceeded $200 billion.