Russia has come to the aid of Venezuela with a deal to restructure $3.15bn of sovereign debt, allowing Caracas to meet obligations to other creditors and underlining Moscow’s role as the crisis-hit country’s main foreign backer. Rating agencies this week declared Venezuela in default on several of its international bonds, worth more than $60bn in total. The country has said it will have to restructure the debt as part of what is set to be one of the largest sovereign defaults in history.
“Venezuela is advancing towards the recomposition of its external debt, to the benefit of its people,” Simon Zerpa, Venezuela’s economy minister, said from Moscow. The intervention by Moscow allowed Venezuela to sidestep major western creditors, and analysts said the country was emerging as a “test case” for sovereign defaults, which are normally handled through a group of postwar institutions like the International Monetary Fund and the Paris Club.
Both Russia, which is a member of the Paris Club of international creditors, and China, which is not, are emerging as alternate venues for embattled countries seeking to avoid debt restructuring managed by traditional economic powers like the US and Western Europe. “There is now the possibility of a lot of bilateral sovereign and quasi-sovereign [credit] exposure that is not being transparently reported”, said Douglas Rediker, a former US representative on the IMF board. “No longer do you have the certainty that the Paris Club is going to reflect [the positions of] the vast majority of creditors”.