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Russia defaults on foreign debt following sanctions

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Yahoo Finance’s Rick Newman joins the Live show to discuss G7 leaders announcing sanctions on Russian gold as well as Russia’s failed interest payments and the outlook for Russian oil.

Video Transcript

- We'll switch gears here. We were talking international a moment ago as well. G7 leaders, they met over the weekend to announce an import ban on Russian gold. This the latest blow to Russia who has now slid into debt default after failing to make interest payments totaling $100 million. Let's bring in Yahoo Finance's Rick Newman to discuss these latest sanctions further. Rick, help us break this down just a little bit more and some of the larger implications that you're tracking.

RICK NEWMAN: Yeah. There are three things going on here. So first, the ban on purchasing Russian gold. Gold is the second largest export category for Russia after energy. So the G7 nations are going to put a ban on purchasing Russian gold, that will extend to a lot of other countries just because of the influence of the G7.

At the same time, Russia has failed to make interest payments on debt held by foreigners. That was expected. And that's not because Russia doesn't have the money. Russia does have the money to make those payments. It's because the-- all of the sanctions on the Russian financial system have essentially blocked them from making those payments.

And then the third thing is a discussion on how the West and other nations sanctioning Russia might impose price caps on Russian oil. This would be pretty complicated. And they didn't say they've reached agreement on this, they've said at the G7 meeting they're working on a plan. And this is something US Treasury Secretary Janet Yellen has been promoting. So we'll see if they come up with a final plan on that. And then of course, the broader question is, will it work?

- It's a good question, Rick, especially since I've been hearing reporting that Russian oil income is pretty much back to where it was before the invasion, in part, because-- in large part, because of the gains that we've seen in oil prices. It's still selling to China. It's selling to India. And even if there's a price cap, it doesn't seem like that would affect those sources of, you know, those markets for Russia.

RICK NEWMAN: It's even more than that, Julie. Russia is actually earning more revenue from energy sales than it was earning before the war started. It is selling less volume. Sanctions have cut into the amount of Russia coming-- Russian oil coming onto the market, one reason that oil prices are sky high at the moment. But because prices are high, Russia's actually getting more revenue.

What's happening in the Russian economy is basically two things. The consumer economy there is really hurting. They'll probably have a 10% decline in GDP. That is a severe recession. But in terms of the energy revenue, which is what Putin uses to finance his military, that money keeps coming in. And at least in terms of stuff Putin can buy, he's got plenty of money for the time being to keep this war going. So I don't think anybody ever said sanctions alone were going to end this war in four months, and they clearly are not going to.

- Yeah, unfortunately not. Thanks so much, Rick, appreciate it. We're going to talk more about the outlook for oil at the top of the next hour.