Page 75 - bne_April 2021_20210401

bne April 2021
Opinion 75
Others offered a different explanation. Amid a dire COVID-19 situation and a struggling economy, Ivanishvili’s decision could have been motivated by saving himself to avoid public outcry for upcoming troubles.
Non-political reasons too could be at play. After all, Ivanishvili has not always been a politician. A billionaire who, according to the Bloomberg Billionaires Index, is the richest man in Georgia with an estimated wealth of about $5.7bn, always claimed to be in politics only temporarily. A lover of animals and owner of a collection of rare paintings, Ivanishvili has
How bad can it get if US imposes sanctions on Russian debt?
Maximilian Hess, head of political risk at Hawthorn Advisors in London
Sovereign debt sanctions targeting Russia's ability to issue foreign currency debts are once again in the news, with the Biden administration and Boris Johnson’s UK government both said to be considering the move.
It is not the first time these have been proposed; indeed, ever since then-president Barack Obama responded to Russia’s invasion of Ukraine and efforts to crush its democratic and pro-Western aspirations by limiting the access of key Russian firms to foreign debt markets through the implementation of the then-new sectorial sanctions regime, capital markets have been among the key battlegrounds of Russo-Western rivalry.
But much has changed since Tom Tugendhat MP, the Conservative chair of the UK’s Commons Foreign Affairs Committee, first suggested barring Moscow from Western debt markets in March 2018. Moscow had already begun to improve its reserves-to-debt ratio in 2015, even as oil prices remained low, in the aftermath of the initial sanctions and escalated
the effort that year, stepping it up from the introduction of legislation, dubbed the ‘bill from hell,’ by a group of bipartisan Senators later in August 2018.
By January 2019, Russia’s reserves exceeded its external debts. Moscow made much of this apparent success of fiscal management, brushing aside concerns that it was worried
always been famous for his distaste for public life, a life that he had to lead since he came to power in 2012. The 65-year-old could indeed be thinking of a permanent break.
But perhaps the biggest trouble for the ruling party is that Ivanishvili’s quitting emboldened the opposition. In many ways, the current political crisis is a result of a power vacuum in Georgian politics no leaders could fill. The opposition sees the possibilities of fracturing within GD which could be accelerated only with street demonstrations, picketing of administrative buildings and calling for Western involvement.
The US is toying with the idea of imposing sanctions on Russian debt. But what will happen if it does so?
about the risk of such US sanctions even as it was clear that the threat was motivating debt management considerations.
Indeed, this effort involved not only managing the amount of Russian foreign currency debt issued, but also updating the wording of the contracts underpinning them. Russia did not issue any new foreign currency bonds in 2014 or 2015 as markets remained cool to the Kremlin’s ongoing devastation of eastern Ukraine and risk of further sanctions resulting, but it did resume issuing Eurobonds in 2016, raising $1.75bn that May.
The new wording reflected this sanctions risk, with the bond’s prospectus making reference to a so-called ‘[alternative] payment currency event’ allowing Moscow to re-pay debt holders in US dollars, Euros or Swiss Francs when interest payments or the principal came due "if, for reasons beyond its control, the Russian Federation is unable to make payments of principal or interest (in whole or in part) in respect of the New Bonds in US dollars". What level of sovereign debt sanctions would trigger the event is not specified.
The clause was described at the time by Oleg Kouzmin of Renaissance Capital as "a totally new feature" of a sovereign bond instrument. No other sovereign appears to have since borrowed or adapted the innovation.
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