A Question of Default

Moscow’s financial district.Credit…Agence France-Presse — Getty Images

Payback time

Today is the beginning of what is likely a long battle over Russian debt, with $117 million in interest payments due on the government’s dollar-denominated bonds. If Russia fails to make the payments, that could be its first default on foreign debt since the 1917 Bolshevik Revolution. The Times’s Eshe Nelson, Alan Rappeport and DealBook’s Lauren Hirsch took a look at what’s at stake — and what could happen next.

The state of play: The Russian government owes about $40 billion in bonds denominated in dollars and euros. Half of that debt is owned by foreign investors. Russian government bonds were considered investment grade as recently as a few weeks ago, and were included in indexes used to benchmark other funds.

The big question: Will Russia pay in dollars or rubles? Russia says that sanctions cutting it off from the international financial system mean that it can only pay in rubles, and that doing so is an acceptable means of payment given the circumstances. Others disagree, and say that paying dollar-denominated bonds in rubles would constitute a default. Regardless, the payments due today have a 30-day grace period, so a default wouldn’t technically happen until mid-April.

How damaging would default be? Regulators say that a Russian default does not pose a systemic risk, because of limited exposure to the country’s assets, which many investors pared back after the annexation of Crimea in 2014. What’s more,​ investors have already taken the financial hit: Russian bonds are trading at a fraction of face value. There has also been forced selling of bonds after the assets were kicked out of indexes. There is always the risk that there will be “some player that nobody has noticed that all of a sudden is in distress,” said Paul Cadario, a former World Bank official, with uncertain consequences for the broader financial system.

What happens next? It’s unclear what will happen to investors who bought credit default swaps on Russian debt, because it is uncertain whether Russia will be declared in default if it pays in rubles. And quirks of Russian bond contracts mean that bondholders have limited ability to sue if it does default. “It’s not to say that creditors won’t be able to take Russia to court and get a judgment,” said Jay Newman, who helped lead the 15-year legal battle against Argentina over defaulted debt at Elliott Management, “but it’s going to be a long, hard slog, and nobody knows what the rules are.”

The latest in the Russia-Ukraine war:

  • A major German power supplier warned against banning Russian energy imports, and European car plants are suffering a shortage of Ukraine-made components.

  • Russia’s new censorship law is forcing reporters to weigh news against safety.

  • A jet belonging to the sanctions-hit oligarch Roman Abramovich has flown to Moscow, while control of an investment vehicle linked to him has been shifted to a business associate. The soccer club Everton F.C. is lining up new financing after cutting ties to sponsors linked to the oligarch Alisher Usmanov, who is also under sanctions in Britain.

  • David Solomon, Goldman Sachs’s C.E.O., sought to clarify his previous comments about Wall Street’s role in ostracizing Russia: “We firmly believe it is our responsibility” to support U.S. efforts to “punish Putin and his regime for the invasion of Ukraine,” he said in a new statement.

  • For up-to-the-minute news, see The Times’s live blog and updated maps.


Chinese stocks soar after Beijing promises to stabilize markets. Shares rallied after government officials promised to support stock markets and end a clampdown on tech companies. Stocks had slumped amid concerns about blowback to Beijing over its ties to Moscow and new pandemic lockdowns in tech hubs like Shenzhen.

Oil drops below $100 a barrel. The fall reflected those pandemic lockdowns in China. Coal prices jumped, however, as buyers anticipated Russia cutting off exports in retaliation for sanctions. Meanwhile, Saudi Arabia is reportedly considering pricing some of its oil sales in renminbi, bolstering the Chinese currency’s standing.

Air travel rebounds to pre-pandemic levels. U.S. travelers spent an estimated $6.6 billion on domestic flights last month, 6 percent more than in February 2019. Airlines reported rising daily ticket sales, but fear headwinds from higher fuel prices.

Pfizer and BioNTech seek U.S. approval for a second booster shot. The drugmakers argue that another dose would help protect those 65 and older against infection from the coronavirus, not just hospitalization.

AMC bought a stake in a gold mine. Yes, really. The movie theater chain moved markets by acquiring 22 percent of Hycroft Mining, which had faced financial duress (and isn’t currently mining). The deal confused analysts — Bloomberg’s Matt Levine wonders whether AMC is becoming a sort of meme-stock investment bank.

A Fed no longer bound to zero

The Federal Reserve is widely expected to raise interest rates today, by a quarter of a point, for the first time since lowering its benchmark rate to near zero at the start of the pandemic. While the increase wouldn’t be a surprise, the market’s reaction might be. (In 2015, the first in a series of Fed rate increases caused significant swings in the stock market.)

What comes next is less certain: The futures market predicts a nearly equal chance of six, seven or eight quarter-point rate increases this year, including the one expected today. (Since there are seven meetings on the schedule, the upper limit would imply a half-point increase at some point.) This path will be determined by whether Jay Powell, the Fed chair, can produce a soft landing — that is, taming high inflation without sending the economy into a recession.

  • Ethan Harris of Bank of America said interest rates could end up a lot higher than many people expect. When the Fed starts tightening, markets “typically underprice” how high interest rates end up going, he wrote in a recent note to clients.

For more on the Fed’s rationale for raising rates, and how it might trickle through the economy, see our preview. The Times’s economic team will also run a live briefing with reactions to the Fed’s decision, which will be announced at 2 p.m. Eastern.

“We are entering an era of financial economic war, inflation and climate transition. These risks cannot be dismissed for political reasons, certainly at this moment when the possibilities of mitigating them still exist.”

— Sarah Bloom Raskin, in a letter to President Biden asking to withdraw her nomination to serve as the Fed’s top bank regulator. She lacked sufficient support to pass the Senate, with some Democrats joining all Republicans in opposing her nomination, citing in part her statements on policing climate risks.

Inside a makeshift refugee shelter near the Romania-Ukraine border.Credit…Cristian Movila for The New York Times

A refugee crisis tests Europe’s economy

With more than three million people having fled Ukraine — and millions more likely to follow — the costs of resettling refugees is expected to run to tens of billions of dollars, The Times’s Patricia Cohen writes.

That will weigh heavily on the European countries that take them in, just as those nations recover from the pandemic and grapple with supply shortages and inflation. And the permanent integration of millions of people could reshape the continent’s economy.

Confiscating ‘ill-gotten luxuries’ for Ukraine aid

Volodymyr Zelensky, Ukraine’s president, will address Congress today to ask for more American support for his country as it fights the Russian invasion. The plea comes as lawmakers consider new legislation that would direct money seized from Russian oligarchs “for the benefit of the people of Ukraine.”

“Putin and his oligarchs stow their dirty money in rule-of-law nations by purchasing mansions, mega-yachts, artwork and other high-value assets,” said Senator Sheldon Whitehouse, Democrat of Rhode Island, in a statement about the bill, which would go beyond freezing the assets of oligarchs on sanctions lists and allow for the confiscation and liquidation of assets above $2 million. “We ought to seize those ill-gotten luxuries and put them to use.”

The new bill is a step after “KleptoCapture.” The Justice Department recently announced an interagency group called Task Force KleptoCapture, dedicated to enforcing economic punishments against Russia, including by seizing assets. The Asset Seizure for Ukraine Reconstruction Act, introduced by a bipartisan group of senators, would expand the department’s authority to channel revenue from these forfeitures to reconstruction, humanitarian assistance and weapons for Ukraine. It would also allow the Treasury to reward tipsters.

What are its chances? When President Biden previewed Task Force KleptoCapture in his State of the Union speech, he got applause from lawmakers on both sides of the aisle. Upsized aid packages for Ukraine also have widespread support. With Zelensky’s plea echoing in the ears of lawmakers who have shown unusual unanimity of late, the Senate legislation (an updated version of a bipartisan House bill) could advance quickly in Congress but slow down when it reaches the White House, which has moved more cautiously than lawmakers on some issues to do with Ukraine.

Timing is everything: Oligarchs may outmaneuver the law, however fast authorities go. Officials in Britain are facing criticism about processes that some say allow those at risk to move assets before sanctions hit.



  • Trafigura, a giant commodities trader, has sought billions from private equity firms to steady its finances amid whipsawing markets. (Bloomberg)

  • Masa Son, the founder of SoftBank, pledged up to 33 percent of his stake in the tech giant against loans, as the company’s shares have fallen. (Bloomberg)

  • E.U. antitrust regulators signed off on Amazon’s $8.5 billion takeover of MGM. (Reuters)

  • Current and former BuzzFeed employees accused the digital media publisher of illegally denying them the chance to sell their shares at a higher price after its market debut. (NYT)

  • Top M.&A. advisers return to New Orleans tomorrow for the Tulane Corporate Law Institute, which is in-person and online; the deadline for registration is today. (Corporate Law Institute)


  • The S.E.C. is reportedly investigating the Big Four accounting firms for potential conflicts of interest, again. (WSJ)

  • The National Labor Relations Board issued a complaint against Starbucks over claims the company retaliated against two union organizers in Arizona. (NYT)

  • The Senate passed a bill to permanently move the U.S. to Daylight Saving Time. (NYT)

Best of the rest

  • Intel plans to spend at least $19 billion to build two factories in Germany. (NYT)

  • Another ship owned by Evergreen has run aground, this time in the Chesapeake Bay, a year after the Ever Given blocked the Suez Canal for weeks. (NYT)

  • “Behind the Entenmann’s Cellophane, a Slice of Long Island Life” (NYT)

  • Nature restoration is becoming a real-estate developers’ selling point. (NYT)

  • The latest subject of study at New York University: Taylor Swift. (WSJ)

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