Here’s How Messy a Russian Bond Default Could Be

a really interesting topic all around and throughout history. Russian debt has, you know, for at least a couple of times, sort of burst into the public consciousness, the first time in the early nineteen hundreds with the eighteen default on Czarist imperial bonds, and then with another I think it was a near default in the end on Brady bonds

that were issued by Russia. And now we're in another moment, moment where it seems like everyone's going to be talking about Russian debt yet again, are there other holders of those early who are obscure courts somewhere trying to collect? Uh? There are a lot of investors who throughout the years have tried to collect on Czarist imperial debt. Yes, but we have to talk about what's happening right now, which could also lead to a protract protracted series of litigation

in various courts. But we're recording this on Wednesday, March sixteen, and it is the day that Russia is supposed to be paying about a hundred seventeen million dollars worth of interest on two dollar bonds. And the question is not only is it going to be able to pay those bonds, but what happens on other types of bonds? Is it going to pay those out in rubles? Are those going to constitute a default? What jurisdiction, could litigation actually happen

in There are so many questions and swirling around this depth. Well, to me, part of the question is like, okay, what we think of a country defaulting on its bonds and then it goes in It gets punished by the market in some way, it's out of the market for a long time. Investors don't want to touch it. But it feels like in the case of Russia, due to the sanctions and the voluntary sanctions, it's already been cut off

from the world. I mean, it's hard to imagine what is the scenario enrich Russia gets more cut off from the world. Part of me is wondering, even if as they do pay bonds. How given the cut off of you know, banks and other financial intermediaries, so how literally do you make the payment? Obviously, they're the questions of does Russia even have the hard courrege here of the access after having lost so much access to uh its

f X reserves. So there are all kinds of reasons why obviously the default is in question, or the sort of question about payments, but also like what does it even mean to default in this environment? Right? And do the normal sort of mechanisms of push and pull actually apply. Um So I'm very pleased to say that we really do have the perfect guests to talk about this. We are going to be speaking with Mittu Kulati. He's a

professor of law at University of Virginia. He's also been on the show i think a number of times at this point and is an all round expert in the topic of sovereign debt. We also have Mark Wedemeyer. He is a professor of law at University of North Carolina. So thank you so much to you both for coming

on all thoughts, You're welcome, thanks for having us. So maybe we should just start with a big picture question, how unusual is the situation that we currently find ourselves in when it comes to Russian debt, are there any historic parallels that we can look to? You know, I mentioned Russia has defaulted on its a couple of times previously, But how much do those historic situations actually apply to

the current events. It is him think to say that there aren't historical precedents, and there probably isn't anything directly on point, although maybe Mark will correct me, since he knows bits of this history a lot better than I do.

But in the last century, in the century prior, where there was lots of sovereign debt being issued, most sovereign debt was issued in order to finance wars, and when war would break out, some countries stopped paying because they had to use the money to fight wars, or they stopped paying because some of the investors were located in

the country that it was fighting against. So many of the questions that we are asking today literally today, did come up and were analyzed by the leading international law experts of the time. It's just that it was over a hundred years ago and today we've all forgotten what those answers were. Now, those of us who are concerned about this are busy dredging up are really old international law books to figure out what happens in this context. But I don't know if Mark has at different read

of this history. No, I think that that's right. I think that the difference here is that we have kind of forgotten in the modern world just how much geopolitical tension sometimes companies. Uh, let's assume by the time your listeners here this, there's been a Russian default. We've kind of forgotten how much geopolitical tension often is associated with that.

And we've gotten used to thinking about private creditors and their enforcement rights, and what the role of litigation is and so forth, and so in some ways, what's unique about this is the combination of those two things. Explain that further. I mean, you know, it's easy to think of some of the potential locations. Obviously, there's the sanctions you mentioned, the role of private creditors, their ability ability

to enforce their payout. I mean, it's inconceivable, I guess, to even imagine what a jurisdiction or what court things would apply at these days with the sanctions. But talk to us a little bit more about how complicated this situation is. From a historical perspective. Well, it's it's it's

complicated in all kinds of ways. One of them is that you've got, at the one point, this really tempting set of targets Russian assets that are frozen abroad, assets belonging to agents who are maybe acting on behalf of the Russian government. And yet you know, the reality is nobody who is a creditor of the government is going to be able to find enough assets to sees and to force the sale of and to get their claim

paid in full. And this is a game for patient creditors, the gamble, as you can be enough of a pain in the butt to a country for long enough that it will decide it's better off paying you than it is to keep fighting. And you know, recent historical experience suggests the Russians are plenty capable of out waiting even the most determined kinds of creditors. So the the question is whether you expect to be able to to change that calculus in the in the near future. Can I

ask Mark a question that my students have been asking me. Mark, I know you are literally the world's leading expert on this concept of veil piercing in the sovereign debt context, can creditors, even at a low probability UH estimation, go after any of the oligarch assets. My sense from reading your writing is this is not utterly implausible, but I haven't asked you the questions, so I'm asking you here

it is not utterly implausible. But one way to kind of set a baseline here is to recognize that there have been creditors the for the UK shareholders and others who have been doing exactly this thing, going after Russian state owned enterprises, going after individuals for years and years and years on this theory that these other people were really the alter egos of the Russian government, and for

the most part they have struck out. So I guess the question I would be asking myself if I were a creditor now is whether I think courts are going to be more receptive to that argument, both because the tensions between the of the home states of these courts and the Russian government men are so much greater, but also maybe courts are going to be more aware of

how the Russian government acts through intermediaries abroad. If you think that courts are suddenly going to get more receptive to those arguments, then you know, maybe this seems like a much more appealing prospect, but it hasn't had any

luck so far. I want to get into a lot of these jurisdiction questions, but maybe before we do, we could talk a little bit about what Russian debt actually is and how it's structured, because I think the country as a whole has about a hundred fifty billion in foreign currency debt, and that's issued by the government and you know, big companies like gas Prom, But within the subset of bonds actually issued by the Russian sovereign there are different types of debt, and this is something that

the market is starting. It seems to focus on the difference between certain bonds versus others. And some of these bonds have something called, you know, an alternative payment currency event clause, which a lot of people are digging into at the moment. Could you maybe explain to us exactly what that looks like and how normal it is to see those in a sovereign debt. So these clauses are

are not normal at all. And we looked a lot at the Russian debt, Russian Ukrainian debt at the time of the Crimean invasion two fourteen, and we realized then that some of these terms and that was debt that Russia had lent to the the dictator in Ukraine at the time in order to prop him up. And we realized then that desponds wild structured as international euro bonds,

have some weird clauses in them, unusual. And you guys know this market, this is a market completely dominated by boilerplate, where it's just cut and paste transactions that don't take more than a few minutes. And we knew then that Russia was doing weird things. Now, this alternate payments clause, I have only seen it in the recent Russian bonds. Literally, the bonds issued after the Crimean invasions seem to have a clause in them that anticipates Russia misbehaving and sanctions

being increased. I mean, it is astonishing to read the risk disclosures in these bonds. I think there's something like seven or eight pages. Uh, and Mark can correct me, seven or eight pages talking about all the bad things that Putin has done, invade here, you know, take over their human rights violation somewhere else, and telling investors, look, you know there might be sanctions, and if there are sanctions,

we're gonna pay in rubles. As Mark articulated it to me a couple of days ago, it's as if the investors are, uh, I'm giving putin insurance for doing bad stuff, and that the true irony is that many of these investors are the ones who have been running around touting their E. S G. Cred and at the same time they're giving putin insurance to you know, take over Ukraine. Now I'm I'm probably overstating this, but yes, these clauses are very weird, and there are a form of insurance

protection for Russian misbehavior. You know, it's interesting to hear the nature of these bonds issued after the annexation of Crimea. And I guess the degree to which that incident that hostile uh, that hostile act did not seem to phase uh, so many players across the rest of Europe. And I'm thinking also about a recent episode that we did on natural gas and you think, okay, that could have been a moment where say, you know, countries decided, well maybe

we shouldn't be some reliant on Russian natural gas. Uh. Nothing changed. And now if you're describing kind of the same phenomenon where you say these E s G. Minded investors saw the annexation. Then Russia went on to put in these clauses. Can you just can you talk a little bit about more what specifically are in these clauses, what do they say, and then what do they mean

right now? And I shouldn't know just briefly for those who don't have a terminal looking at terminal, and I don't know about the specifics here, but you know, obviously Russian bond prices have been absolutely killed. Dollar bonds that were over a hundred on the dollar at the beginning of February now around eleven sends, some more short term euro bonds UH in the thirties. So just for the context here, all types of you know, Russian Russian liabilities

having been killed. But why don't we talk more specifically about what is in these clauses and what they mean

for for lenders. Basically, the clauses say that if for reasons beyond Russia's control, I don't know if that's an exact quote, but it's pretty close, if for reasons beyond its control, it can't come up with whatever currency the bond is denominated in, then there's a list of kind of heart currencies that it falls back on, and if for reasons beyond its control, it can't come up with one of those, then it pays in rubles, and they don't.

They don't say anything beyond that. And so the question really is for this subset of the Russian bonds, whether the sanctions regime UH and the inability to access foreign exchange, whether that it constitutes a circumstances outside Russia's control, or whether really the whole thing is within Russia's control, because they could just turn the tanks around and presumably the

sanctions would be lifted. There's something else that's in the bonds that's relatively unusual, or I should say there's something that's lacking in the bonds. Um, it doesn't include a waiver of immunity, I think, or a clause that sort

of submits to the jurisdiction of foreign courts. Can you explain exactly what that means and how it relates to you know, for instance, if Russia said, um, it can't necessarily do this today, but on future payments, if it said, well, for reasons outside of our control, we're going to pay these bonds in rubles instead of dollars or euros, and then foreign investors decide, hey, we don't like that. We're going to take Russia to court to argue against this.

What does it mean from a jurisdictional perspective are they going to be able to do that? So this is the perfect follow up question to what Joe asked. So you have this clause that, as Mark described, says, you know, if for reasons beyond our control, uh, we are unable to pay in dollars franks, uh um euros, we'll pay you in brubles. But the contract doesn't say who gets to determine beyond control? I mean, does putin get to determine? Oh, I've I've decided you can't pay in dollars anymore. So

it's beyond the control of the treasury to pay. And normally when you would have a question like this, the place you would go is you would go to the jurisdiction clause and the bonds to see where do these cases get brought? Where has the sovereign submitted to jurisdiction, Where has it waived its immunity and these bonds again, and this is unusual again, and it is our fault for not noticing this or paying greater attention to this before the clauses explicitly say we have not submitted to

jurisdiction anywhere. And the clauses explicitly say we have not weve sovereign immunity. Now here's the twist, though, I think on first reading, if you are not a jurisdiction specialist, you would think okay. So basically they can't be taken into court anywhere. They have not waved sovereign immunity and

they don't submit to jurisdiction anywhere. That is wrong because if you go out and reach investors and sell them dollar bonds or you send them Euro bonds, and you do that in New York or London, even though you say I don't agree to jurisdiction anymore, the courts there can say, hey, you came into our jurisdiction, you sold investor. Response here we are taking jurisdiction and you're engaged in commercial activity, so we are deeming you to have waves

sovereign immunity. So in a sense, Russia might think that they haven't consented to any of these court jurisdiction, but I think that would be wrong. Can I ask, what is the consequence of actually defaulting? So Russia may have means at its disposal to avoid technically defaulting. Okay, doesn't pay in dollars or some other hard currency, but it

pays in rubles, so okay, technically it avoids default. But again, you know, in the context of this very unusual situation, what does that even mean Because normally we think about, you know, sort of catastrophic consequences for a country that doesn't pay. Uh, it's for creditors. But in this situation, Russia is already dramatically cut off in a way that's far worse than what we would expect to see any sovereign debt or experience in the event of a default.

So this is the hard question. I think that investors are faith sing. It's kind of hard to know what to make of the Let's assume again that there has been a default by the time the episode airs. Your choices, I could accelerate the bond and I could decide I'm going to go to court, as me Too says, I can probably convince a court in London or maybe New York to take jurisdiction. But if I do this, I'm

in it. For the long haul. You know, I'm I'm gonna I've picked my path, and I'm gonna be fighting with the Russian government for god knows how many years into the future. Or I can sit around and I can hope that this thing resolves in a way that allows for the resumption of payments. I have to think that for most investors, maybe not for the die hard subset who liked the litigation game, but for most investors, going to court and accelerating the dead is a pretty

unappealing prospect right now. But we'll see it. The longer this drags out, the more that calculus might change me too. I don't know, maybe you have a different view of it. No. In fact, my view in some ways, unless Mark you figure out a way we could start attaching those oligarch assets, is that if you're really only chasing the Russian state. Uh, this is difficult, and we could probably take some lessons here from the attempts of jilted investors to chase after

the Russian state for expropriation in the Yukost case. Uh this, you know, I think bond investors haven't really paid very much attention to this, But there's basically, I think it's upwards of sixty billion dollars in claims that for which jilted investors have received judgments against Russia, and Russia just have no intention of paying, and the markets don't seem to have penalized Russia for this uh in the recent past, continuing to believe, oh, maybe they'll behave well with respect

to the bonds, even though they're behaving so badly with respect to other claims. And you know that. I mean, this is what we all talked to our students about reputational consequences and how the sovereign debt market is. UH, it is such a robust reputational market, it might mean, you know, the the recent experience maybe makes us think

that's complete ble. I mean, you sort of touched on this um before, But when we talk about going after oligarch's assets, I'm getting flashbacks to you know, Paul Singer seizing at Argentine boat and stuff like that. To what extent could it be possible that the legal industry they're less sympathetic to Russia in this context, or that they harden up their view of Russia and it does become easier to pursue those assets. I mean, to some extent, we've already seen this, right, A lot of things have

changed over the past two weeks. Things that we thought were difficult to push through legally seemed to have been done very quickly. And if they're not done purely through the law, they've been done through self sanctioning and companies and people voluntarily cutting Russia out of the system. So I'm just wondering, is there the possibility that it begins to change? Yes, Now, what I handicap that possibility? Uh? No, I I or at least I wouldn't know how to

do it. But if you think about some of the recent developments that might be relevant here, they're actually not what one would expect from the usual kind of credit or activity. They're not courts being a little more receptive to assets. There are things like the U. S. Government just deciding that it's gonna use bunch of Afghan Central Bank assets to pay some creditors. You know that the this is why the geopolitics actually matters quite a lot.

It's not clear to me that the real way to get at Alagur assets here is you convince a court that they're the alter ego of the Russian government and you attach them and you have an execution sale. But governments are coming mighty close to just expropriating assets when they feel that that's necessary as part of the sanctions regime and that they've got the political support to do so.

I don't I don't know whether we should expect the wholesale expropriation and redistribution of OI assets, but I do think that anybody with a bone of legal realism in their body has to think that courts and other legal actors are going to be more receptive to this kind of thing now than they were five years ago or

even frankly a month ago. Presumably for the creditors, though this sort of more political expropriation as opposed to the court avenue is less appealing in the sense that if it just sort of goes through sort of political apparatus, is those those assets, aren't that's serily going to be liquidate, liquidated to the benefit of creditors. Well maybe and maybe

not so. What we've seen recently with the Iranian Central Bank assets and the most recently with the Afghan Central Bank assets is that the administration, I think, using executive order and then some Congressional Action has said, you know, we're we're making these uh wide open, fat and happy for a certain subset of claimants to go after. So

this is this is very different. At the beginning of the podcast, you and Tracy were talking about the analogies or in memories of the eighteen default on the tsars Um debts back then and then subsequently, you know, when Germany defaults in the Nazi era and the governments were very careful about not doing things to make enable private claimants to seize foreign state assets. Today that's completely changed.

Governments are much more willing to say to private creditors they're not behaving, well, gonna make make it possible for you to seize that assets. Now. I'm not sure if President Biden will use that path today to allow Paul Singer and his lawyers to go after these assets. But if you look at who's talking in the press today, who is salivating at the possibility of seizing assets, and you have to read between the lines, I think a lot of those actors in the Argentine episode are are

they've got their guns ready? If I can just add one quick point, I think that the so there's two things here, at that point in slightly different directions. One is, to the extent we're looking at these non traditional ways to distribute assets, then financial creditors are going to be competing with other claimants and will maybe not be the most sympathetic of the group. So it certainly wasn't to help financial creditors that off ghun or around in central

bank assets were um, we're accessed. The other thing I just want to point out there was one of the reasons why efforts to get at Russian assets failed historically in the recent years anyway, is because countries were worried. The Russians explicitly threatened, Hey, if you let private creditors get at our assets, we're gonna do the same thing to your assets here, and of course we'll gin up some claims, uh, and you're we're going to expropriate in

effect your assets here. Query weather. That kind of threat which was quite effective at getting UH, courts and legislators in Europe to back off their willingness to let creditors get at Russian assets. Query Weather. That kind of threat works. Now you know you mentioned uh, the sort of types that were active in the Argentina situation circling now, and I realized we've we've made it about thirty minutes into

this podcast without actually mentioning Perry Passu. Uh So maybe we should talk about that and how it potentially applies to the Russia's situation, because I think you've pointed out that there is another way that the Russian bonds are kind of weird and unique, and that has to do with the way the Perry pass you pause was originally um structured and then it seems to have been revised. So could you maybe walk us through what exactly happened there and what Perry pass you is for those who

don't know. Oh, I'm so glad you asked this question. I love pari passu party. It's my favorite part. Pari passu,

which just means in Latin equal or equal step. Is this old obscure clause from over a century ago at least, that's basically in every bond contract, And in around two thousand, two thousand and one, in an obscure case involving Peru, Paul Singers Operation Elliott Associates, they were trying to sue Peru for not paying it they had held out from debt restructuring and they came up with this incredibly clever strategy using the clause that basically everybody who had written

about it in the literature until then said, you know, there's this weird clause, but we don't know why it's there. It's kind of old, and so we repeat it. It's pretty it has some Latin. We like Latin. And they said, hey, it says in equal step. In equal step means you can't pay some creditors even though those creditors took you know, twenty cents on the dollar, and not pay us. Equal means you have to pay us an equal percentage of whatever you're paying. And they said, since we didn't restructure

our debt, you have to. If you're paying them hundred percent of their restructure debt, that means twenty cents on the dollar, you have to pay us hundred percent of our non restructor debt, which is hundred cents on the dollar. And they made a killing against Peru. Everybody thought this

strategy would never work. You know, my co authors and I, which include Mark, we did interview us with basically every senior sovereign debt lawyer in London and New York, and we said aren't you worried about this happening again, this crazy strategy, since you guys haven't changed your clauses. And they said, no, no court in England or New York

would ever follow the crazy Brussels strategy. And Elliott Associates ran the same strategy again against Argentina, and this time instead of winning about a hundred million, the two billion. And so now that fast forward to today. Basically every international issuer in the sovereign debt market changed their clauses in order to preempt this strategy. And they did this around two thousand and fourteen, I mean time of CRIMEA and Mark and I Mark and correct me. I thought

this is the end of this story. In fact, many articles were written about this is the end of the story. Turns out the Russian bonds have the old parti passu clause, the old one that Elliott won on. And I mean, I can't help but think it's either the Russians were so arrogant that they thought they would never get sued, or somebody goofed. Now there are other goofs in the in the specific party pass clause, and we can't tell

whether they're intentional or not. But the key point is if I were an institution like Elliott and although they've become more respectable now, I would read this clause and say, hey, I can run this again. I don't know what you guys think, but for me, this is so fantastic. Well

you just on that note. I mean, it does seem like there was a change to the peripass you clause where they deleted the idea that the peripassy would would sort of apply in the future, and it seems like they altered the language to suggest that it just applies at one point of time. What does that mean exactly? Like it seems like the implication would be that the

government could subordinate some investors at a later date. Okay, so you're really getting into the weeds of the subcrivision, and I that I'm enjoying sitting back and listening hearing Tracy's expertise. Are questions. So normally the Perry Patsu clause that nobody understands says the bonds rank and will rank equally with all other debt, and let's not talk about

all of them. So again, rank and will rank. So it's a representation at the time the bond is they shoot saying they all rank equally now, and then it says in the future, we will continue to make sure they rank equally. In the Russian clause, it says basically, the bonds rank equally. They deleted the words having to

do with the future the will rank now. I think the question for court will be do we read it as the bond just saying they ranked equally at the time of issue, which makes the whole pari passu clause gibberish meaningless because the whole point of the clauses that it protects you against future misbehavior by the sovereign. Or is the court going to say, oh, that looks like a typo. And it also doesn't make sense with they have events of default saying it is an event of

default if the bonds no longer ranked pari passu. So I mean there are these giant inconsistencies in the document and the court's going to have to decide. And of course this goes back to the fact that we have no idea which court uh, but a court is going to have to decide are these typos or aren't these brilliant strategic moves by the Russians to make sure they never have liability. My guesses and Elliott associates would be

able to make a good argument, but again it's not clear. Tracy, I mean you you have pointed out a very crucial portion of this truly obscure clause, the deletion of some two words that that could be valued at a few billion dollars. Thinking about going back, I think about the Argentina uh Legal Fund and obviously dragged on several years. As we've been talking about. Russia is a unique situation because it's already just in the last few weeks, become so cut off from the world, far more than even

we would expect to see from a sovereign debt. Is sure, how much do some of the consequences and legal questions that you're talking about intellect in the last few answers? How much do they essentially only become relevant in a future world down the down the line, when perhaps under a different UH Russian president who knows, but it's hard

to see them in the existing one. Russia makes an attempt to sort of rejoin the financial world in good standing because obviously in the current moment, you know, no one is going to be buying new Russian dead and basically it's cut off from financially, but there could be a point point ten years from now or five years from now where a different Russian government wants to become part of the global market. Again, how much do these

questions essentially become relevant? Is well, the they're going to have to resolve these legal fights by then in order to rejoin the financial system. I mean, I think this is not just a great question, it's the question that determines whether going to court and playing the litigation game is worthwhile. The Argentina example is a great one because it was not just a few years, it was fifteen years.

The first big chunk of that was spent chasing Argentina's assets around the world and coming up mostly empty handed. And then everything came to a head with this pari passue litigation that me too was talking about. But the reason it all worked, the reason it produced a big payout at the end of the day, is because there was a change in government and because Argentina wanted to normalize its financial and commercial relationships with the rest of

the world. So I guess the question is this, do you, if I'm an investor, do I think Russia is going to want to normalize those relationships, or do I expect to be looking at Fortress Russia for the next fifteen or twenty years, Because if it's the latter, I can have all the enforcement rights in the world that I could have the best written contract that gives me the most potent set of enforcement rights in the world. But unless I get lucky, I'm not going to get paid.

And one thing's for sure, most investors will not get paid. The only way you get paid is when the country wants to normalize its relations Can we maybe talk a little bit about Ukrainian debt and what we might expect to see there as well, because a lot of the focus has naturally been on Russia. It has a lot of issuance. It seems like there's a very big question mark over whether or not it's going to be able

to pay out on what it owes. But Ukraine has issued in the market as well, and also is presumably financially and perhaps operationally strange strained given uh it's fighting against Russia at the moment, So what happens there? In some ways this is the bigger and more interesting question to me Ukraine has, if I'm not mistaken, almost aboul. The amount of sovereign debt that Russia has somewhere in the range of nine plus billion dollars worth of debt,

and they were already in trouble before the invasion. Right now, I mean now that that they have, by estimates hundred billion dollars plus in damage to their country, and they're desperately spending their money and defending themselves. It seems for sure that they are going to go into default. But there are another couple of complicated questions here. Complicated because the relevant law goes back again to two hundred years ago.

One of which is, at some point Russia has taken over in its invasion so much of Ukraine that the debt becomes Russian debt, and at that point investors are going to have to sue Russia for the debt. And one other complications in this is what happens to the debt that Ukraine is desperately trying to raise right now in order to fight the Russians. Does does Russia have to pay that debt as well after it takes over

the Ukraine. It's not clear. The old international law actually said that Russia might not have to pay that debt. That strikething as completely antiquated and wrong, But that is what the old law would have said. Ukraine obviously needs money to fight to defend itself right now, and suppose, you know, the war comes to an end in Ukraine, sovereignty is intact. Is that debt treated just like any other debt that would be issued in normal times? Are

the opportunities for forgiveness of that debt? Are there other ways that it can raise money beyond debt markets such that it doesn't impose the future financial burden? Is that what is the optimal way to fund its defense efforts internationally without creating this huge future burden? So me too may have more developed thoughts on this than I do.

My initial reaction, first of all, is that this is a relatively happy set of circumstances, and so I only hope that this is the problem we're dealing with down the road, going to commercial creditors and asking them for concessional treatment to get you back on your feet after something like this, You know, surely there's going to be

a restructuring. There would need to be a restructuring, and I would imagine that commercial creditors might be a little bit more willing to participate than in the normal case. But you know, I don't see any way that you even begin to restructure the debt that Ukraine has much less begin the process of rebuilding without massive concessional and official finance. And surely the private sector has a role in that. But but I I think it's a relatively

small one. Me too. Maybe you have a different view. No, I mean there are two questions, and Joe, I hope I'm not misunderstanding you. I think the two questions are one, what happens now if the bond markets, the private bond markets are reluctant to fund Ukraine? And then the other question is what happens after all of this blows over, assuming Russia doesn't take over all of Ukraine? What happens to Ukraine? There? I think? And maybe I'm just echoing

what Markus saying. I think in both cases, the official sector, meaning mostly Western Europe and the United States, needs to step in and provide the support a provide support out because the private markets are going to be reluctant to support Ukraine and be promised to support them after the

fact in the restructuring that is surely not their fault. Yes, they're precarious, but they were they're precarious because of the invasion of of Crimea, and after that invasion, the official sector didn't really say this is not your fault, we're gonna help you in a big way. They made Ukraine deal with the private creditors and Ukraine actually got pretty harsh treatment in that restructuring after the two thousand fourteen invasion.

I think this time we need, we need the rest of the world needs to do a lot better of visa b Ukraine. But those decisions have not been made. I mean that this is this has just all been left up in the air, as if nobody's really thinking ahead. Met too. I think that's a good place to leave an Obviously, there are so many questions around this entire situation. It's going to be absolutely fascinating to see how it all plays out. So thank you to you and Mark

as well for coming back on the show. Thanks, thank you, thanks for having us well, Joe. I found that conversation absolutely fascinating and clearly there are a lot of threads to follow. But you know, one kind of crazy thing to think about is that I mentioned that nineteen eighteen

debt when we started. I mean, some people are still holding certificates, you know, stored in their addicts you can buy them off eBay and things like that, and still waiting for a payout and thinking it's going to happen. And so it's kind of weird to think that maybe we're in a similar situation now where people are going to be holding onto Russian bonds and waiting for a payout a hundred years from now. Eb the real OTC,

the original or maybe the original electronic bond marketplace. But no, in all seriousness, like that's sort of a century is

a very long time. But it does seem like in many cases for the investors that you know, are looking for a big pay day, the bet is years and years down the road, because it really does seem, uh, there's very little prospect of some sort of I think, I mean, I think a lot of people think that that as long as the current government is in place in Russia that there's going to be some big reproach, approach,

a mint and reintegration. I mean, there may be some dropping of the sanctions after the war, hopefully hopefully positive outcome, but it is hard to imagine a complete rollback, right and going back to the early status quo, and as such, it may be that some of the big big pad could be fifteen twenty years, who knows how long, how

far into the future totally. But the other thing that this all reminded me of, and I think I've touched on this in various works before, but this idea that bonds, ultimately they have so many, so much morality and values sort of embedded in them, and they all have a story, right, like these bonds were issued because of this, and it means I owe money to this person because of that. And when the story starts to shift and when the values we attached to that debt start to shift, which

is arguably what we're seeing with Russia now. You know, three weeks ago, Russia was investment grade and it was considered obviously not a pristine player on the international stage, but acceptable for people to do business with. And that has just completely changed in less than a month. I think that's a that's a really good point, and the idea of the sort of our once a new story

is attached, then perhaps the law follows. And so a good example that could be sort of this question of all right, our oligarch assets held abroad, can they be seized and liquidated for the benefit of creditors? And maybe that has been very legally difficult to do in the past. But already, as our guests discussed, in the last few weeks, we've seen a rethinking of certain Western government to the

idea of seizing and liquidating oligarch assets. And as such, maybe what seemed to be an impossible veil to appears previously may suddenly be possible. It just changes the environment. This is exactly it. And not just liquidated to satisfy creditors, but could they for instance, Mark sort of hinted at this, could they be liquidated to fund some sort of you know,

war aid or compensation for people in Ukraine? And then and then again right, and the fascinating question of whether Russia itself may be a creditor for debt being currently incurred by Ukraine's government is a fascinating question. The other thing that I found really striking is this idea that again after the annexation of Crimea, Russia seemed to pay

no penalty. In fact that even that it's stipulated in it put in this new language about possible sanctions, and yet it was still considered the bonds were trading strongly. This idea that after this incident that almost nothing fundamentally changed is incredibly striking and almost maybe shameful. Sever Yeah, um, well, I feel like we could talk about this for another four hours, but shall we leave it there? Let's leave it there, all right? This has been another episode of

the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joey Isn't All. You can follow me on Twitter at the Stalwart. Big thanks to our producers Magnus Hendrickson and Colm Tipton. Followed the Bloomberg head of podcast, Francisca Levi at Francesca Today and check out all of our podcasts and Bloomberg under the handle and podcasts. Thanks for listening,