1 00:00:05,840 --> 00:00:09,080 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:09,200 --> 00:00:13,760 Speaker 1: I'm Tracy Allaway and I'm Joe. Did you know that 3 00:00:13,880 --> 00:00:17,360 Speaker 1: I have a sort of side hobby in the history 4 00:00:17,440 --> 00:00:22,280 Speaker 1: of Russian debt? I thought it was Chinese debt. It's both. 5 00:00:22,320 --> 00:00:26,840 Speaker 1: Actually they kind of fit together, um for reasons that 6 00:00:26,920 --> 00:00:30,800 Speaker 1: I could tell you about much later on. But it's 7 00:00:30,800 --> 00:00:34,280 Speaker 1: a really interesting topic all around and throughout history. Russian 8 00:00:34,280 --> 00:00:37,280 Speaker 1: debt has, you know, for at least a couple of times, 9 00:00:37,280 --> 00:00:40,800 Speaker 1: sort of burst into the public consciousness, the first time 10 00:00:41,000 --> 00:00:45,360 Speaker 1: in the early nineteen hundreds with the eighteen default on 11 00:00:45,720 --> 00:00:52,040 Speaker 1: Czarist imperial bonds, and then with another I think it 12 00:00:52,080 --> 00:00:55,080 Speaker 1: was a near default in the end on Brady bonds 13 00:00:55,840 --> 00:00:59,959 Speaker 1: that were issued by Russia. And now we're in another moment, 14 00:01:00,000 --> 00:01:02,840 Speaker 1: moment where it seems like everyone's going to be talking 15 00:01:02,880 --> 00:01:06,000 Speaker 1: about Russian debt yet again, are there other holders of 16 00:01:06,040 --> 00:01:11,640 Speaker 1: those early who are obscure courts somewhere trying to collect? Uh? 17 00:01:11,680 --> 00:01:14,559 Speaker 1: There are a lot of investors who throughout the years 18 00:01:14,560 --> 00:01:18,080 Speaker 1: have tried to collect on Czarist imperial debt. Yes, but 19 00:01:19,360 --> 00:01:21,600 Speaker 1: we have to talk about what's happening right now, which 20 00:01:21,600 --> 00:01:27,640 Speaker 1: could also lead to a protract protracted series of litigation 21 00:01:27,800 --> 00:01:31,720 Speaker 1: in various courts. But we're recording this on Wednesday, March sixteen, 22 00:01:32,360 --> 00:01:35,160 Speaker 1: and it is the day that Russia is supposed to 23 00:01:35,280 --> 00:01:39,280 Speaker 1: be paying about a hundred seventeen million dollars worth of 24 00:01:39,280 --> 00:01:43,000 Speaker 1: interest on two dollar bonds. And the question is not 25 00:01:43,160 --> 00:01:46,720 Speaker 1: only is it going to be able to pay those bonds, 26 00:01:46,920 --> 00:01:50,560 Speaker 1: but what happens on other types of bonds? Is it 27 00:01:50,600 --> 00:01:53,040 Speaker 1: going to pay those out in rubles? Are those going 28 00:01:53,080 --> 00:01:58,240 Speaker 1: to constitute a default? What jurisdiction, could litigation actually happen 29 00:01:58,320 --> 00:02:02,440 Speaker 1: in There are so many questions and swirling around this depth. Well, 30 00:02:02,520 --> 00:02:05,040 Speaker 1: to me, part of the question is like, okay, what 31 00:02:05,200 --> 00:02:08,280 Speaker 1: we think of a country defaulting on its bonds and 32 00:02:08,320 --> 00:02:11,280 Speaker 1: then it goes in It gets punished by the market 33 00:02:11,360 --> 00:02:13,520 Speaker 1: in some way, it's out of the market for a 34 00:02:13,560 --> 00:02:15,680 Speaker 1: long time. Investors don't want to touch it. But it 35 00:02:15,760 --> 00:02:18,560 Speaker 1: feels like in the case of Russia, due to the 36 00:02:18,600 --> 00:02:22,880 Speaker 1: sanctions and the voluntary sanctions, it's already been cut off 37 00:02:22,919 --> 00:02:25,040 Speaker 1: from the world. I mean, it's hard to imagine what 38 00:02:25,240 --> 00:02:28,079 Speaker 1: is the scenario enrich Russia gets more cut off from 39 00:02:28,080 --> 00:02:31,240 Speaker 1: the world. Part of me is wondering, even if as 40 00:02:31,280 --> 00:02:34,280 Speaker 1: they do pay bonds. How given the cut off of 41 00:02:34,600 --> 00:02:38,040 Speaker 1: you know, banks and other financial intermediaries, so how literally 42 00:02:38,400 --> 00:02:41,400 Speaker 1: do you make the payment? Obviously, they're the questions of 43 00:02:41,720 --> 00:02:44,560 Speaker 1: does Russia even have the hard courrege here of the 44 00:02:44,600 --> 00:02:47,880 Speaker 1: access after having lost so much access to uh its 45 00:02:48,080 --> 00:02:51,680 Speaker 1: f X reserves. So there are all kinds of reasons 46 00:02:51,720 --> 00:02:55,200 Speaker 1: why obviously the default is in question, or the sort 47 00:02:55,240 --> 00:02:57,400 Speaker 1: of question about payments, but also like what does it 48 00:02:57,440 --> 00:03:00,920 Speaker 1: even mean to default in this environment? Right? And do 49 00:03:01,000 --> 00:03:04,920 Speaker 1: the normal sort of mechanisms of push and pull actually apply. 50 00:03:05,680 --> 00:03:08,440 Speaker 1: Um So I'm very pleased to say that we really 51 00:03:08,480 --> 00:03:10,600 Speaker 1: do have the perfect guests to talk about this. We 52 00:03:10,639 --> 00:03:13,440 Speaker 1: are going to be speaking with Mittu Kulati. He's a 53 00:03:13,440 --> 00:03:16,280 Speaker 1: professor of law at University of Virginia. He's also been 54 00:03:16,280 --> 00:03:18,480 Speaker 1: on the show i think a number of times at 55 00:03:18,520 --> 00:03:21,520 Speaker 1: this point and is an all round expert in the 56 00:03:21,560 --> 00:03:24,800 Speaker 1: topic of sovereign debt. We also have Mark Wedemeyer. He 57 00:03:24,919 --> 00:03:28,480 Speaker 1: is a professor of law at University of North Carolina. 58 00:03:28,639 --> 00:03:30,720 Speaker 1: So thank you so much to you both for coming 59 00:03:30,720 --> 00:03:34,079 Speaker 1: on all thoughts, You're welcome, thanks for having us. So 60 00:03:34,240 --> 00:03:37,160 Speaker 1: maybe we should just start with a big picture question, 61 00:03:37,640 --> 00:03:42,960 Speaker 1: how unusual is the situation that we currently find ourselves 62 00:03:43,080 --> 00:03:45,600 Speaker 1: in when it comes to Russian debt, are there any 63 00:03:45,640 --> 00:03:48,720 Speaker 1: historic parallels that we can look to? You know, I 64 00:03:48,760 --> 00:03:52,800 Speaker 1: mentioned Russia has defaulted on its a couple of times previously, 65 00:03:52,960 --> 00:03:57,080 Speaker 1: But how much do those historic situations actually apply to 66 00:03:57,640 --> 00:04:00,920 Speaker 1: the current events. It is him think to say that 67 00:04:00,960 --> 00:04:07,440 Speaker 1: there aren't historical precedents, and there probably isn't anything directly 68 00:04:07,520 --> 00:04:10,960 Speaker 1: on point, although maybe Mark will correct me, since he 69 00:04:10,960 --> 00:04:13,240 Speaker 1: knows bits of this history a lot better than I do. 70 00:04:13,720 --> 00:04:19,359 Speaker 1: But in the last century, in the century prior, where 71 00:04:19,400 --> 00:04:23,840 Speaker 1: there was lots of sovereign debt being issued, most sovereign 72 00:04:23,920 --> 00:04:28,400 Speaker 1: debt was issued in order to finance wars, and when 73 00:04:28,480 --> 00:04:31,800 Speaker 1: war would break out, some countries stopped paying because they 74 00:04:31,839 --> 00:04:34,640 Speaker 1: had to use the money to fight wars, or they 75 00:04:34,640 --> 00:04:38,680 Speaker 1: stopped paying because some of the investors were located in 76 00:04:38,720 --> 00:04:41,719 Speaker 1: the country that it was fighting against. So many of 77 00:04:41,760 --> 00:04:46,200 Speaker 1: the questions that we are asking today literally today, did 78 00:04:46,320 --> 00:04:50,760 Speaker 1: come up and were analyzed by the leading international law 79 00:04:50,880 --> 00:04:54,479 Speaker 1: experts of the time. It's just that it was over 80 00:04:54,520 --> 00:04:58,080 Speaker 1: a hundred years ago and today we've all forgotten what 81 00:04:58,160 --> 00:05:01,839 Speaker 1: those answers were. Now, those of us who are concerned 82 00:05:01,839 --> 00:05:06,840 Speaker 1: about this are busy dredging up are really old international 83 00:05:06,920 --> 00:05:09,800 Speaker 1: law books to figure out what happens in this context. 84 00:05:10,320 --> 00:05:12,360 Speaker 1: But I don't know if Mark has at different read 85 00:05:12,440 --> 00:05:15,240 Speaker 1: of this history. No, I think that that's right. I 86 00:05:15,279 --> 00:05:19,840 Speaker 1: think that the difference here is that we have kind 87 00:05:19,839 --> 00:05:26,000 Speaker 1: of forgotten in the modern world just how much geopolitical 88 00:05:26,560 --> 00:05:32,600 Speaker 1: tension sometimes companies. Uh, let's assume by the time your 89 00:05:32,680 --> 00:05:35,880 Speaker 1: listeners here this, there's been a Russian default. We've kind 90 00:05:35,880 --> 00:05:40,040 Speaker 1: of forgotten how much geopolitical tension often is associated with that. 91 00:05:40,160 --> 00:05:44,560 Speaker 1: And we've gotten used to thinking about private creditors and 92 00:05:44,640 --> 00:05:48,359 Speaker 1: their enforcement rights, and what the role of litigation is 93 00:05:48,440 --> 00:05:51,040 Speaker 1: and so forth, and so in some ways, what's unique 94 00:05:51,040 --> 00:05:55,360 Speaker 1: about this is the combination of those two things. Explain 95 00:05:55,480 --> 00:05:58,320 Speaker 1: that further. I mean, you know, it's easy to think 96 00:05:58,360 --> 00:06:02,799 Speaker 1: of some of the potential locations. Obviously, there's the sanctions 97 00:06:02,839 --> 00:06:06,960 Speaker 1: you mentioned, the role of private creditors, their ability ability 98 00:06:07,040 --> 00:06:10,360 Speaker 1: to enforce their payout. I mean, it's inconceivable, I guess, 99 00:06:10,440 --> 00:06:14,479 Speaker 1: to even imagine what a jurisdiction or what court things 100 00:06:14,480 --> 00:06:17,560 Speaker 1: would apply at these days with the sanctions. But talk 101 00:06:17,640 --> 00:06:20,800 Speaker 1: to us a little bit more about how complicated this 102 00:06:21,240 --> 00:06:25,000 Speaker 1: situation is. From a historical perspective. Well, it's it's it's 103 00:06:25,000 --> 00:06:28,839 Speaker 1: complicated in all kinds of ways. One of them is 104 00:06:28,920 --> 00:06:34,640 Speaker 1: that you've got, at the one point, this really tempting 105 00:06:34,800 --> 00:06:39,960 Speaker 1: set of targets Russian assets that are frozen abroad, assets 106 00:06:40,000 --> 00:06:43,359 Speaker 1: belonging to agents who are maybe acting on behalf of 107 00:06:43,360 --> 00:06:46,880 Speaker 1: the Russian government. And yet you know, the reality is 108 00:06:46,920 --> 00:06:49,599 Speaker 1: nobody who is a creditor of the government is going 109 00:06:49,640 --> 00:06:55,039 Speaker 1: to be able to find enough assets to sees and 110 00:06:55,240 --> 00:06:58,599 Speaker 1: to force the sale of and to get their claim 111 00:06:58,680 --> 00:07:03,719 Speaker 1: paid in full. And this is a game for patient creditors, 112 00:07:03,760 --> 00:07:06,600 Speaker 1: the gamble, as you can be enough of a pain 113 00:07:06,680 --> 00:07:09,359 Speaker 1: in the butt to a country for long enough that 114 00:07:09,480 --> 00:07:12,960 Speaker 1: it will decide it's better off paying you than it 115 00:07:13,040 --> 00:07:16,960 Speaker 1: is to keep fighting. And you know, recent historical experience 116 00:07:17,000 --> 00:07:20,720 Speaker 1: suggests the Russians are plenty capable of out waiting even 117 00:07:20,720 --> 00:07:24,640 Speaker 1: the most determined kinds of creditors. So the the question 118 00:07:24,760 --> 00:07:30,200 Speaker 1: is whether you expect to be able to to change 119 00:07:30,240 --> 00:07:34,160 Speaker 1: that calculus in the in the near future. Can I 120 00:07:34,200 --> 00:07:38,560 Speaker 1: ask Mark a question that my students have been asking me. Mark, 121 00:07:38,600 --> 00:07:42,239 Speaker 1: I know you are literally the world's leading expert on 122 00:07:42,880 --> 00:07:47,200 Speaker 1: this concept of veil piercing in the sovereign debt context, 123 00:07:48,000 --> 00:07:54,680 Speaker 1: can creditors, even at a low probability UH estimation, go 124 00:07:54,920 --> 00:08:00,680 Speaker 1: after any of the oligarch assets. My sense from reading 125 00:08:00,720 --> 00:08:05,760 Speaker 1: your writing is this is not utterly implausible, but I 126 00:08:05,800 --> 00:08:08,000 Speaker 1: haven't asked you the questions, so I'm asking you here 127 00:08:09,640 --> 00:08:13,680 Speaker 1: it is not utterly implausible. But one way to kind 128 00:08:13,680 --> 00:08:17,320 Speaker 1: of set a baseline here is to recognize that there 129 00:08:17,360 --> 00:08:21,360 Speaker 1: have been creditors the for the UK shareholders and others 130 00:08:21,400 --> 00:08:25,800 Speaker 1: who have been doing exactly this thing, going after Russian 131 00:08:26,000 --> 00:08:31,160 Speaker 1: state owned enterprises, going after individuals for years and years 132 00:08:31,160 --> 00:08:35,720 Speaker 1: and years on this theory that these other people were 133 00:08:35,760 --> 00:08:38,520 Speaker 1: really the alter egos of the Russian government, and for 134 00:08:38,559 --> 00:08:41,439 Speaker 1: the most part they have struck out. So I guess 135 00:08:41,440 --> 00:08:44,360 Speaker 1: the question I would be asking myself if I were 136 00:08:44,640 --> 00:08:47,880 Speaker 1: a creditor now is whether I think courts are going 137 00:08:47,920 --> 00:08:53,800 Speaker 1: to be more receptive to that argument, both because the 138 00:08:54,200 --> 00:08:59,080 Speaker 1: tensions between the of the home states of these courts 139 00:08:59,120 --> 00:09:01,400 Speaker 1: and the Russian government men are so much greater, but 140 00:09:01,480 --> 00:09:04,960 Speaker 1: also maybe courts are going to be more aware of 141 00:09:05,040 --> 00:09:10,200 Speaker 1: how the Russian government acts through intermediaries abroad. If you 142 00:09:10,240 --> 00:09:13,079 Speaker 1: think that courts are suddenly going to get more receptive 143 00:09:13,080 --> 00:09:15,880 Speaker 1: to those arguments, then you know, maybe this seems like 144 00:09:16,120 --> 00:09:18,760 Speaker 1: a much more appealing prospect, but it hasn't had any 145 00:09:18,840 --> 00:09:21,520 Speaker 1: luck so far. I want to get into a lot 146 00:09:21,559 --> 00:09:24,440 Speaker 1: of these jurisdiction questions, but maybe before we do, we 147 00:09:24,480 --> 00:09:27,840 Speaker 1: could talk a little bit about what Russian debt actually 148 00:09:27,960 --> 00:09:31,880 Speaker 1: is and how it's structured, because I think the country 149 00:09:32,000 --> 00:09:34,640 Speaker 1: as a whole has about a hundred fifty billion in 150 00:09:34,800 --> 00:09:37,360 Speaker 1: foreign currency debt, and that's issued by the government and 151 00:09:38,080 --> 00:09:41,360 Speaker 1: you know, big companies like gas Prom, But within the 152 00:09:41,400 --> 00:09:46,160 Speaker 1: subset of bonds actually issued by the Russian sovereign there 153 00:09:46,200 --> 00:09:50,240 Speaker 1: are different types of debt, and this is something that 154 00:09:50,280 --> 00:09:53,679 Speaker 1: the market is starting. It seems to focus on the 155 00:09:53,720 --> 00:09:57,400 Speaker 1: difference between certain bonds versus others. And some of these 156 00:09:57,440 --> 00:10:01,960 Speaker 1: bonds have something called, you know, an alternative payment currency 157 00:10:02,080 --> 00:10:06,160 Speaker 1: event clause, which a lot of people are digging into 158 00:10:06,200 --> 00:10:09,320 Speaker 1: at the moment. Could you maybe explain to us exactly 159 00:10:09,360 --> 00:10:12,440 Speaker 1: what that looks like and how normal it is to 160 00:10:12,559 --> 00:10:17,280 Speaker 1: see those in a sovereign debt. So these clauses are 161 00:10:17,320 --> 00:10:21,920 Speaker 1: are not normal at all. And we looked a lot 162 00:10:22,000 --> 00:10:26,040 Speaker 1: at the Russian debt, Russian Ukrainian debt at the time 163 00:10:26,120 --> 00:10:30,920 Speaker 1: of the Crimean invasion two fourteen, and we realized then 164 00:10:31,000 --> 00:10:34,319 Speaker 1: that some of these terms and that was debt that 165 00:10:34,480 --> 00:10:40,280 Speaker 1: Russia had lent to the the dictator in Ukraine at 166 00:10:40,320 --> 00:10:42,800 Speaker 1: the time in order to prop him up. And we 167 00:10:42,920 --> 00:10:49,040 Speaker 1: realized then that desponds wild structured as international euro bonds, 168 00:10:49,320 --> 00:10:53,800 Speaker 1: have some weird clauses in them, unusual. And you guys 169 00:10:53,880 --> 00:10:58,720 Speaker 1: know this market, this is a market completely dominated by boilerplate, 170 00:10:59,160 --> 00:11:03,840 Speaker 1: where it's just cut and paste transactions that don't take 171 00:11:03,880 --> 00:11:06,800 Speaker 1: more than a few minutes. And we knew then that 172 00:11:06,880 --> 00:11:12,199 Speaker 1: Russia was doing weird things. Now, this alternate payments clause, 173 00:11:12,600 --> 00:11:17,280 Speaker 1: I have only seen it in the recent Russian bonds. Literally, 174 00:11:17,320 --> 00:11:22,040 Speaker 1: the bonds issued after the Crimean invasions seem to have 175 00:11:22,120 --> 00:11:29,559 Speaker 1: a clause in them that anticipates Russia misbehaving and sanctions 176 00:11:29,600 --> 00:11:34,400 Speaker 1: being increased. I mean, it is astonishing to read the 177 00:11:34,480 --> 00:11:39,640 Speaker 1: risk disclosures in these bonds. I think there's something like 178 00:11:39,800 --> 00:11:44,000 Speaker 1: seven or eight pages. Uh, and Mark can correct me, 179 00:11:44,120 --> 00:11:47,200 Speaker 1: seven or eight pages talking about all the bad things 180 00:11:47,240 --> 00:11:50,880 Speaker 1: that Putin has done, invade here, you know, take over 181 00:11:51,000 --> 00:11:55,240 Speaker 1: their human rights violation somewhere else, and telling investors, look, 182 00:11:55,480 --> 00:11:57,840 Speaker 1: you know there might be sanctions, and if there are sanctions, 183 00:11:57,880 --> 00:12:01,560 Speaker 1: we're gonna pay in rubles. As Mark articulated it to 184 00:12:01,640 --> 00:12:05,920 Speaker 1: me a couple of days ago, it's as if the 185 00:12:06,040 --> 00:12:13,080 Speaker 1: investors are, uh, I'm giving putin insurance for doing bad stuff, 186 00:12:13,440 --> 00:12:16,720 Speaker 1: and that the true irony is that many of these 187 00:12:16,720 --> 00:12:20,559 Speaker 1: investors are the ones who have been running around touting 188 00:12:21,240 --> 00:12:25,400 Speaker 1: their E. S G. Cred and at the same time 189 00:12:25,440 --> 00:12:30,320 Speaker 1: they're giving putin insurance to you know, take over Ukraine. 190 00:12:30,360 --> 00:12:34,679 Speaker 1: Now I'm I'm probably overstating this, but yes, these clauses 191 00:12:35,000 --> 00:12:38,240 Speaker 1: are very weird, and there are a form of insurance 192 00:12:38,280 --> 00:12:43,600 Speaker 1: protection for Russian misbehavior. You know, it's interesting to hear 193 00:12:43,960 --> 00:12:47,400 Speaker 1: the nature of these bonds issued after the annexation of Crimea. 194 00:12:47,559 --> 00:12:52,600 Speaker 1: And I guess the degree to which that incident that 195 00:12:52,840 --> 00:12:57,440 Speaker 1: hostile uh, that hostile act did not seem to phase uh, 196 00:12:57,600 --> 00:13:00,000 Speaker 1: so many players across the rest of Europe. And I'm 197 00:13:00,120 --> 00:13:02,880 Speaker 1: thinking also about a recent episode that we did on 198 00:13:03,080 --> 00:13:06,160 Speaker 1: natural gas and you think, okay, that could have been 199 00:13:06,360 --> 00:13:10,760 Speaker 1: a moment where say, you know, countries decided, well maybe 200 00:13:10,760 --> 00:13:13,360 Speaker 1: we shouldn't be some reliant on Russian natural gas. Uh. 201 00:13:13,480 --> 00:13:16,160 Speaker 1: Nothing changed. And now if you're describing kind of the 202 00:13:16,200 --> 00:13:19,280 Speaker 1: same phenomenon where you say these E s G. Minded 203 00:13:19,400 --> 00:13:23,920 Speaker 1: investors saw the annexation. Then Russia went on to put 204 00:13:24,000 --> 00:13:26,599 Speaker 1: in these clauses. Can you just can you talk a 205 00:13:26,679 --> 00:13:30,600 Speaker 1: little bit about more what specifically are in these clauses, 206 00:13:30,960 --> 00:13:32,880 Speaker 1: what do they say, and then what do they mean 207 00:13:32,960 --> 00:13:36,320 Speaker 1: right now? And I shouldn't know just briefly for those 208 00:13:36,360 --> 00:13:39,440 Speaker 1: who don't have a terminal looking at terminal, and I 209 00:13:39,440 --> 00:13:41,960 Speaker 1: don't know about the specifics here, but you know, obviously 210 00:13:42,040 --> 00:13:46,000 Speaker 1: Russian bond prices have been absolutely killed. Dollar bonds that 211 00:13:46,040 --> 00:13:48,680 Speaker 1: were over a hundred on the dollar at the beginning 212 00:13:48,679 --> 00:13:51,560 Speaker 1: of February now around eleven sends, some more short term 213 00:13:51,559 --> 00:13:55,440 Speaker 1: euro bonds UH in the thirties. So just for the 214 00:13:55,520 --> 00:13:59,960 Speaker 1: context here, all types of you know, Russian Russian liabilities 215 00:14:00,000 --> 00:14:02,839 Speaker 1: having been killed. But why don't we talk more specifically 216 00:14:02,880 --> 00:14:05,840 Speaker 1: about what is in these clauses and what they mean 217 00:14:05,960 --> 00:14:10,719 Speaker 1: for for lenders. Basically, the clauses say that if for 218 00:14:10,800 --> 00:14:14,960 Speaker 1: reasons beyond Russia's control, I don't know if that's an 219 00:14:14,960 --> 00:14:18,880 Speaker 1: exact quote, but it's pretty close, if for reasons beyond 220 00:14:18,920 --> 00:14:23,320 Speaker 1: its control, it can't come up with whatever currency the 221 00:14:23,360 --> 00:14:26,960 Speaker 1: bond is denominated in, then there's a list of kind 222 00:14:26,960 --> 00:14:30,120 Speaker 1: of heart currencies that it falls back on, and if 223 00:14:30,160 --> 00:14:32,520 Speaker 1: for reasons beyond its control, it can't come up with 224 00:14:32,560 --> 00:14:35,920 Speaker 1: one of those, then it pays in rubles, and they don't. 225 00:14:36,000 --> 00:14:39,200 Speaker 1: They don't say anything beyond that. And so the question 226 00:14:39,240 --> 00:14:43,520 Speaker 1: really is for this subset of the Russian bonds, whether 227 00:14:43,640 --> 00:14:50,200 Speaker 1: the sanctions regime UH and the inability to access foreign exchange, 228 00:14:50,360 --> 00:14:55,360 Speaker 1: whether that it constitutes a circumstances outside Russia's control, or 229 00:14:55,400 --> 00:14:57,920 Speaker 1: whether really the whole thing is within Russia's control, because 230 00:14:57,960 --> 00:15:00,760 Speaker 1: they could just turn the tanks around and presumably the 231 00:15:00,800 --> 00:15:03,880 Speaker 1: sanctions would be lifted. There's something else that's in the 232 00:15:03,920 --> 00:15:08,480 Speaker 1: bonds that's relatively unusual, or I should say there's something 233 00:15:08,520 --> 00:15:12,240 Speaker 1: that's lacking in the bonds. Um, it doesn't include a 234 00:15:12,240 --> 00:15:15,520 Speaker 1: waiver of immunity, I think, or a clause that sort 235 00:15:15,520 --> 00:15:18,640 Speaker 1: of submits to the jurisdiction of foreign courts. Can you 236 00:15:18,680 --> 00:15:22,320 Speaker 1: explain exactly what that means and how it relates to 237 00:15:22,840 --> 00:15:26,800 Speaker 1: you know, for instance, if Russia said, um, it can't 238 00:15:26,840 --> 00:15:29,760 Speaker 1: necessarily do this today, but on future payments, if it said, well, 239 00:15:30,120 --> 00:15:32,720 Speaker 1: for reasons outside of our control, we're going to pay 240 00:15:32,800 --> 00:15:37,440 Speaker 1: these bonds in rubles instead of dollars or euros, and 241 00:15:37,480 --> 00:15:41,000 Speaker 1: then foreign investors decide, hey, we don't like that. We're 242 00:15:41,000 --> 00:15:44,080 Speaker 1: going to take Russia to court to argue against this. 243 00:15:45,120 --> 00:15:47,960 Speaker 1: What does it mean from a jurisdictional perspective are they 244 00:15:47,960 --> 00:15:50,360 Speaker 1: going to be able to do that? So this is 245 00:15:50,400 --> 00:15:54,840 Speaker 1: the perfect follow up question to what Joe asked. So 246 00:15:54,920 --> 00:15:59,000 Speaker 1: you have this clause that, as Mark described, says, you know, 247 00:15:59,040 --> 00:16:03,320 Speaker 1: if for reasons beyond our control, uh, we are unable 248 00:16:03,360 --> 00:16:08,320 Speaker 1: to pay in dollars franks, uh um euros, we'll pay 249 00:16:08,360 --> 00:16:13,360 Speaker 1: you in brubles. But the contract doesn't say who gets 250 00:16:13,360 --> 00:16:18,480 Speaker 1: to determine beyond control? I mean, does putin get to determine? Oh, 251 00:16:18,640 --> 00:16:21,440 Speaker 1: I've I've decided you can't pay in dollars anymore. So 252 00:16:21,520 --> 00:16:24,600 Speaker 1: it's beyond the control of the treasury to pay. And 253 00:16:25,000 --> 00:16:28,280 Speaker 1: normally when you would have a question like this, the 254 00:16:28,360 --> 00:16:32,200 Speaker 1: place you would go is you would go to the 255 00:16:32,360 --> 00:16:36,520 Speaker 1: jurisdiction clause and the bonds to see where do these 256 00:16:36,560 --> 00:16:40,640 Speaker 1: cases get brought? Where has the sovereign submitted to jurisdiction, 257 00:16:40,920 --> 00:16:44,840 Speaker 1: Where has it waived its immunity and these bonds again, 258 00:16:45,120 --> 00:16:49,040 Speaker 1: and this is unusual again, and it is our fault 259 00:16:49,080 --> 00:16:52,640 Speaker 1: for not noticing this or paying greater attention to this 260 00:16:52,800 --> 00:16:57,200 Speaker 1: before the clauses explicitly say we have not submitted to 261 00:16:57,280 --> 00:17:02,080 Speaker 1: jurisdiction anywhere. And the clauses explicitly say we have not 262 00:17:02,240 --> 00:17:07,200 Speaker 1: weve sovereign immunity. Now here's the twist, though, I think 263 00:17:07,280 --> 00:17:12,880 Speaker 1: on first reading, if you are not a jurisdiction specialist, 264 00:17:14,680 --> 00:17:17,800 Speaker 1: you would think okay. So basically they can't be taken 265 00:17:17,840 --> 00:17:20,840 Speaker 1: into court anywhere. They have not waved sovereign immunity and 266 00:17:20,840 --> 00:17:26,159 Speaker 1: they don't submit to jurisdiction anywhere. That is wrong because 267 00:17:26,240 --> 00:17:30,640 Speaker 1: if you go out and reach investors and sell them 268 00:17:30,720 --> 00:17:34,080 Speaker 1: dollar bonds or you send them Euro bonds, and you 269 00:17:34,200 --> 00:17:37,040 Speaker 1: do that in New York or London, even though you 270 00:17:37,200 --> 00:17:41,280 Speaker 1: say I don't agree to jurisdiction anymore, the courts there 271 00:17:41,359 --> 00:17:45,400 Speaker 1: can say, hey, you came into our jurisdiction, you sold investor. 272 00:17:45,440 --> 00:17:50,800 Speaker 1: Response here we are taking jurisdiction and you're engaged in 273 00:17:50,840 --> 00:17:54,560 Speaker 1: commercial activity, so we are deeming you to have waves 274 00:17:54,640 --> 00:17:58,359 Speaker 1: sovereign immunity. So in a sense, Russia might think that 275 00:17:58,440 --> 00:18:02,199 Speaker 1: they haven't consented to any of these court jurisdiction, but 276 00:18:02,359 --> 00:18:14,600 Speaker 1: I think that would be wrong. Can I ask, what 277 00:18:14,800 --> 00:18:18,600 Speaker 1: is the consequence of actually defaulting? So Russia may have 278 00:18:19,040 --> 00:18:23,760 Speaker 1: means at its disposal to avoid technically defaulting. Okay, doesn't 279 00:18:23,800 --> 00:18:26,920 Speaker 1: pay in dollars or some other hard currency, but it 280 00:18:27,600 --> 00:18:31,600 Speaker 1: pays in rubles, so okay, technically it avoids default. But again, 281 00:18:31,680 --> 00:18:34,920 Speaker 1: you know, in the context of this very unusual situation, 282 00:18:35,000 --> 00:18:37,960 Speaker 1: what does that even mean Because normally we think about, 283 00:18:38,080 --> 00:18:41,159 Speaker 1: you know, sort of catastrophic consequences for a country that 284 00:18:41,200 --> 00:18:45,520 Speaker 1: doesn't pay. Uh, it's for creditors. But in this situation, 285 00:18:46,119 --> 00:18:49,200 Speaker 1: Russia is already dramatically cut off in a way that's 286 00:18:49,200 --> 00:18:51,720 Speaker 1: far worse than what we would expect to see any 287 00:18:52,080 --> 00:18:54,600 Speaker 1: sovereign debt or experience in the event of a default. 288 00:18:55,359 --> 00:18:59,200 Speaker 1: So this is the hard question. I think that investors 289 00:18:59,440 --> 00:19:02,360 Speaker 1: are faith sing. It's kind of hard to know what 290 00:19:02,400 --> 00:19:07,240 Speaker 1: to make of the Let's assume again that there has 291 00:19:07,280 --> 00:19:11,359 Speaker 1: been a default by the time the episode airs. Your choices, 292 00:19:12,200 --> 00:19:16,440 Speaker 1: I could accelerate the bond and I could decide I'm 293 00:19:16,440 --> 00:19:18,800 Speaker 1: going to go to court, as me Too says, I 294 00:19:18,800 --> 00:19:22,320 Speaker 1: can probably convince a court in London or maybe New 295 00:19:22,359 --> 00:19:25,000 Speaker 1: York to take jurisdiction. But if I do this, I'm 296 00:19:25,320 --> 00:19:28,040 Speaker 1: in it. For the long haul. You know, I'm I'm 297 00:19:28,080 --> 00:19:31,880 Speaker 1: gonna I've picked my path, and I'm gonna be fighting 298 00:19:31,880 --> 00:19:35,399 Speaker 1: with the Russian government for god knows how many years 299 00:19:35,400 --> 00:19:38,239 Speaker 1: into the future. Or I can sit around and I 300 00:19:38,320 --> 00:19:41,359 Speaker 1: can hope that this thing resolves in a way that 301 00:19:41,400 --> 00:19:45,200 Speaker 1: allows for the resumption of payments. I have to think 302 00:19:45,240 --> 00:19:49,119 Speaker 1: that for most investors, maybe not for the die hard 303 00:19:49,520 --> 00:19:52,920 Speaker 1: subset who liked the litigation game, but for most investors, 304 00:19:53,680 --> 00:19:57,320 Speaker 1: going to court and accelerating the dead is a pretty 305 00:19:57,600 --> 00:20:01,199 Speaker 1: unappealing prospect right now. But we'll see it. The longer 306 00:20:01,240 --> 00:20:05,640 Speaker 1: this drags out, the more that calculus might change me too. 307 00:20:05,680 --> 00:20:08,359 Speaker 1: I don't know, maybe you have a different view of it. No. 308 00:20:08,600 --> 00:20:11,600 Speaker 1: In fact, my view in some ways, unless Mark you 309 00:20:11,680 --> 00:20:15,560 Speaker 1: figure out a way we could start attaching those oligarch assets, 310 00:20:15,760 --> 00:20:20,200 Speaker 1: is that if you're really only chasing the Russian state. Uh, 311 00:20:20,359 --> 00:20:23,880 Speaker 1: this is difficult, and we could probably take some lessons 312 00:20:23,920 --> 00:20:29,720 Speaker 1: here from the attempts of jilted investors to chase after 313 00:20:29,880 --> 00:20:36,040 Speaker 1: the Russian state for expropriation in the Yukost case. Uh this, 314 00:20:36,920 --> 00:20:39,360 Speaker 1: you know, I think bond investors haven't really paid very 315 00:20:39,400 --> 00:20:43,040 Speaker 1: much attention to this, But there's basically, I think it's 316 00:20:43,160 --> 00:20:48,359 Speaker 1: upwards of sixty billion dollars in claims that for which 317 00:20:48,720 --> 00:20:53,719 Speaker 1: jilted investors have received judgments against Russia, and Russia just 318 00:20:54,080 --> 00:20:57,399 Speaker 1: have no intention of paying, and the markets don't seem 319 00:20:57,440 --> 00:21:02,600 Speaker 1: to have penalized Russia for this uh in the recent past, 320 00:21:03,320 --> 00:21:07,320 Speaker 1: continuing to believe, oh, maybe they'll behave well with respect 321 00:21:07,320 --> 00:21:10,480 Speaker 1: to the bonds, even though they're behaving so badly with 322 00:21:10,560 --> 00:21:14,360 Speaker 1: respect to other claims. And you know that. I mean, 323 00:21:14,400 --> 00:21:18,119 Speaker 1: this is what we all talked to our students about 324 00:21:18,200 --> 00:21:22,600 Speaker 1: reputational consequences and how the sovereign debt market is. UH, 325 00:21:22,640 --> 00:21:27,000 Speaker 1: it is such a robust reputational market, it might mean, 326 00:21:27,200 --> 00:21:30,240 Speaker 1: you know, the the recent experience maybe makes us think 327 00:21:30,280 --> 00:21:33,399 Speaker 1: that's complete ble. I mean, you sort of touched on 328 00:21:33,400 --> 00:21:36,720 Speaker 1: this um before, But when we talk about going after 329 00:21:37,200 --> 00:21:41,800 Speaker 1: oligarch's assets, I'm getting flashbacks to you know, Paul Singer 330 00:21:42,000 --> 00:21:45,879 Speaker 1: seizing at Argentine boat and stuff like that. To what 331 00:21:46,080 --> 00:21:52,760 Speaker 1: extent could it be possible that the legal industry they're 332 00:21:52,960 --> 00:21:57,440 Speaker 1: less sympathetic to Russia in this context, or that they 333 00:21:57,560 --> 00:22:00,800 Speaker 1: harden up their view of Russia and it does become 334 00:22:00,880 --> 00:22:04,720 Speaker 1: easier to pursue those assets. I mean, to some extent, 335 00:22:04,720 --> 00:22:06,600 Speaker 1: we've already seen this, right, A lot of things have 336 00:22:06,720 --> 00:22:09,159 Speaker 1: changed over the past two weeks. Things that we thought 337 00:22:09,520 --> 00:22:13,080 Speaker 1: were difficult to push through legally seemed to have been 338 00:22:13,119 --> 00:22:16,240 Speaker 1: done very quickly. And if they're not done purely through 339 00:22:16,240 --> 00:22:20,520 Speaker 1: the law, they've been done through self sanctioning and companies 340 00:22:20,520 --> 00:22:23,560 Speaker 1: and people voluntarily cutting Russia out of the system. So 341 00:22:23,600 --> 00:22:28,639 Speaker 1: I'm just wondering, is there the possibility that it begins 342 00:22:28,680 --> 00:22:34,480 Speaker 1: to change? Yes, Now, what I handicap that possibility? Uh? No, 343 00:22:34,840 --> 00:22:36,679 Speaker 1: I I or at least I wouldn't know how to 344 00:22:36,760 --> 00:22:38,879 Speaker 1: do it. But if you think about some of the 345 00:22:38,960 --> 00:22:43,520 Speaker 1: recent developments that might be relevant here, they're actually not 346 00:22:44,520 --> 00:22:49,720 Speaker 1: what one would expect from the usual kind of credit 347 00:22:49,840 --> 00:22:53,879 Speaker 1: or activity. They're not courts being a little more receptive 348 00:22:53,920 --> 00:22:56,280 Speaker 1: to assets. There are things like the U. S. Government 349 00:22:56,400 --> 00:23:01,400 Speaker 1: just deciding that it's gonna use bunch of Afghan Central 350 00:23:01,400 --> 00:23:05,080 Speaker 1: Bank assets to pay some creditors. You know that the 351 00:23:05,600 --> 00:23:09,280 Speaker 1: this is why the geopolitics actually matters quite a lot. 352 00:23:09,960 --> 00:23:13,159 Speaker 1: It's not clear to me that the real way to 353 00:23:13,280 --> 00:23:18,639 Speaker 1: get at Alagur assets here is you convince a court 354 00:23:18,760 --> 00:23:21,359 Speaker 1: that they're the alter ego of the Russian government and 355 00:23:21,440 --> 00:23:24,480 Speaker 1: you attach them and you have an execution sale. But 356 00:23:25,560 --> 00:23:31,960 Speaker 1: governments are coming mighty close to just expropriating assets when 357 00:23:32,520 --> 00:23:36,120 Speaker 1: they feel that that's necessary as part of the sanctions 358 00:23:36,160 --> 00:23:41,000 Speaker 1: regime and that they've got the political support to do so. 359 00:23:41,119 --> 00:23:44,200 Speaker 1: I don't I don't know whether we should expect the 360 00:23:44,240 --> 00:23:49,119 Speaker 1: wholesale expropriation and redistribution of OI assets, but I do 361 00:23:49,240 --> 00:23:54,280 Speaker 1: think that anybody with a bone of legal realism in 362 00:23:54,320 --> 00:23:57,520 Speaker 1: their body has to think that courts and other legal 363 00:23:57,560 --> 00:24:00,240 Speaker 1: actors are going to be more receptive to this kind 364 00:24:00,240 --> 00:24:03,439 Speaker 1: of thing now than they were five years ago or 365 00:24:03,480 --> 00:24:07,080 Speaker 1: even frankly a month ago. Presumably for the creditors, though 366 00:24:07,680 --> 00:24:11,560 Speaker 1: this sort of more political expropriation as opposed to the 367 00:24:11,600 --> 00:24:15,000 Speaker 1: court avenue is less appealing in the sense that if 368 00:24:15,040 --> 00:24:18,719 Speaker 1: it just sort of goes through sort of political apparatus, 369 00:24:18,760 --> 00:24:21,600 Speaker 1: is those those assets, aren't that's serily going to be liquidate, 370 00:24:21,760 --> 00:24:26,479 Speaker 1: liquidated to the benefit of creditors. Well maybe and maybe 371 00:24:26,520 --> 00:24:31,240 Speaker 1: not so. What we've seen recently with the Iranian Central 372 00:24:31,280 --> 00:24:35,040 Speaker 1: Bank assets and the most recently with the Afghan Central 373 00:24:35,040 --> 00:24:41,760 Speaker 1: Bank assets is that the administration, I think, using executive 374 00:24:41,880 --> 00:24:46,399 Speaker 1: order and then some Congressional Action has said, you know, 375 00:24:46,640 --> 00:24:51,520 Speaker 1: we're we're making these uh wide open, fat and happy 376 00:24:51,680 --> 00:24:56,320 Speaker 1: for a certain subset of claimants to go after. So 377 00:24:56,400 --> 00:24:59,720 Speaker 1: this is this is very different. At the beginning of 378 00:24:59,720 --> 00:25:05,679 Speaker 1: the podcast, you and Tracy were talking about the analogies 379 00:25:07,000 --> 00:25:11,880 Speaker 1: or in memories of the eighteen default on the tsars 380 00:25:12,640 --> 00:25:18,200 Speaker 1: Um debts back then and then subsequently, you know, when 381 00:25:18,280 --> 00:25:24,480 Speaker 1: Germany defaults in the Nazi era and the governments were 382 00:25:24,680 --> 00:25:30,400 Speaker 1: very careful about not doing things to make enable private 383 00:25:30,440 --> 00:25:37,440 Speaker 1: claimants to seize foreign state assets. Today that's completely changed. 384 00:25:38,240 --> 00:25:41,359 Speaker 1: Governments are much more willing to say to private creditors 385 00:25:41,800 --> 00:25:46,879 Speaker 1: they're not behaving, well, gonna make make it possible for 386 00:25:46,920 --> 00:25:50,880 Speaker 1: you to seize that assets. Now. I'm not sure if 387 00:25:51,480 --> 00:25:55,800 Speaker 1: President Biden will use that path today to allow Paul 388 00:25:55,960 --> 00:25:59,439 Speaker 1: Singer and his lawyers to go after these assets. But 389 00:25:59,760 --> 00:26:03,080 Speaker 1: if you look at who's talking in the press today, 390 00:26:03,160 --> 00:26:07,040 Speaker 1: who is salivating at the possibility of seizing assets, and 391 00:26:07,080 --> 00:26:09,840 Speaker 1: you have to read between the lines, I think a 392 00:26:09,880 --> 00:26:16,120 Speaker 1: lot of those actors in the Argentine episode are are 393 00:26:16,160 --> 00:26:19,000 Speaker 1: they've got their guns ready? If I can just add 394 00:26:19,000 --> 00:26:22,400 Speaker 1: one quick point, I think that the so there's two 395 00:26:22,400 --> 00:26:24,879 Speaker 1: things here, at that point in slightly different directions. One is, 396 00:26:25,400 --> 00:26:28,280 Speaker 1: to the extent we're looking at these non traditional ways 397 00:26:28,320 --> 00:26:31,840 Speaker 1: to distribute assets, then financial creditors are going to be 398 00:26:31,880 --> 00:26:35,840 Speaker 1: competing with other claimants and will maybe not be the 399 00:26:35,880 --> 00:26:40,359 Speaker 1: most sympathetic of the group. So it certainly wasn't to 400 00:26:40,400 --> 00:26:43,520 Speaker 1: help financial creditors that off ghun or around in central 401 00:26:43,520 --> 00:26:47,119 Speaker 1: bank assets were um, we're accessed. The other thing I 402 00:26:47,160 --> 00:26:48,760 Speaker 1: just want to point out there was one of the 403 00:26:48,880 --> 00:26:52,800 Speaker 1: reasons why efforts to get at Russian assets failed historically 404 00:26:53,200 --> 00:26:57,360 Speaker 1: in the recent years anyway, is because countries were worried. 405 00:26:58,000 --> 00:27:02,080 Speaker 1: The Russians explicitly threatened, Hey, if you let private creditors 406 00:27:02,080 --> 00:27:05,320 Speaker 1: get at our assets, we're gonna do the same thing 407 00:27:05,359 --> 00:27:08,479 Speaker 1: to your assets here, and of course we'll gin up 408 00:27:08,520 --> 00:27:11,960 Speaker 1: some claims, uh, and you're we're going to expropriate in 409 00:27:12,040 --> 00:27:15,359 Speaker 1: effect your assets here. Query weather. That kind of threat 410 00:27:15,600 --> 00:27:21,120 Speaker 1: which was quite effective at getting UH, courts and legislators 411 00:27:21,119 --> 00:27:25,560 Speaker 1: in Europe to back off their willingness to let creditors 412 00:27:25,560 --> 00:27:28,680 Speaker 1: get at Russian assets. Query Weather. That kind of threat works. 413 00:27:28,720 --> 00:27:32,600 Speaker 1: Now you know you mentioned uh, the sort of types 414 00:27:32,640 --> 00:27:37,040 Speaker 1: that were active in the Argentina situation circling now, and 415 00:27:37,119 --> 00:27:40,160 Speaker 1: I realized we've we've made it about thirty minutes into 416 00:27:40,200 --> 00:27:44,879 Speaker 1: this podcast without actually mentioning Perry Passu. Uh So maybe 417 00:27:44,920 --> 00:27:48,840 Speaker 1: we should talk about that and how it potentially applies 418 00:27:48,920 --> 00:27:51,959 Speaker 1: to the Russia's situation, because I think you've pointed out 419 00:27:52,400 --> 00:27:55,200 Speaker 1: that there is another way that the Russian bonds are 420 00:27:55,640 --> 00:27:58,480 Speaker 1: kind of weird and unique, and that has to do 421 00:27:58,600 --> 00:28:01,720 Speaker 1: with the way the Perry pass you pause was originally 422 00:28:02,200 --> 00:28:06,320 Speaker 1: um structured and then it seems to have been revised. 423 00:28:06,320 --> 00:28:09,040 Speaker 1: So could you maybe walk us through what exactly happened 424 00:28:09,040 --> 00:28:11,520 Speaker 1: there and what Perry pass you is for those who 425 00:28:11,560 --> 00:28:14,439 Speaker 1: don't know. Oh, I'm so glad you asked this question. 426 00:28:14,560 --> 00:28:23,119 Speaker 1: I love pari passu party. It's my favorite part. Pari passu, 427 00:28:23,760 --> 00:28:29,240 Speaker 1: which just means in Latin equal or equal step. Is 428 00:28:29,320 --> 00:28:33,919 Speaker 1: this old obscure clause from over a century ago at least, 429 00:28:34,520 --> 00:28:41,600 Speaker 1: that's basically in every bond contract, And in around two thousand, 430 00:28:41,640 --> 00:28:46,959 Speaker 1: two thousand and one, in an obscure case involving Peru, 431 00:28:47,200 --> 00:28:52,680 Speaker 1: Paul Singers Operation Elliott Associates, they were trying to sue 432 00:28:52,720 --> 00:28:55,720 Speaker 1: Peru for not paying it they had held out from 433 00:28:56,560 --> 00:29:00,320 Speaker 1: debt restructuring and they came up with this incredibly clever 434 00:29:00,480 --> 00:29:05,560 Speaker 1: strategy using the clause that basically everybody who had written 435 00:29:05,560 --> 00:29:08,360 Speaker 1: about it in the literature until then said, you know, 436 00:29:08,480 --> 00:29:11,320 Speaker 1: there's this weird clause, but we don't know why it's there. 437 00:29:11,400 --> 00:29:13,720 Speaker 1: It's kind of old, and so we repeat it. It's 438 00:29:13,760 --> 00:29:18,640 Speaker 1: pretty it has some Latin. We like Latin. And they said, hey, 439 00:29:18,800 --> 00:29:22,120 Speaker 1: it says in equal step. In equal step means you 440 00:29:22,200 --> 00:29:26,200 Speaker 1: can't pay some creditors even though those creditors took you know, 441 00:29:26,240 --> 00:29:29,360 Speaker 1: twenty cents on the dollar, and not pay us. Equal 442 00:29:29,480 --> 00:29:32,239 Speaker 1: means you have to pay us an equal percentage of 443 00:29:32,280 --> 00:29:35,600 Speaker 1: whatever you're paying. And they said, since we didn't restructure 444 00:29:35,720 --> 00:29:39,680 Speaker 1: our debt, you have to. If you're paying them hundred 445 00:29:39,760 --> 00:29:42,920 Speaker 1: percent of their restructure debt, that means twenty cents on 446 00:29:42,960 --> 00:29:45,280 Speaker 1: the dollar, you have to pay us hundred percent of 447 00:29:45,320 --> 00:29:49,600 Speaker 1: our non restructor debt, which is hundred cents on the dollar. 448 00:29:50,320 --> 00:29:54,320 Speaker 1: And they made a killing against Peru. Everybody thought this 449 00:29:54,480 --> 00:29:57,959 Speaker 1: strategy would never work. You know, my co authors and I, 450 00:29:58,360 --> 00:30:02,160 Speaker 1: which include Mark, we did interview us with basically every 451 00:30:02,240 --> 00:30:05,120 Speaker 1: senior sovereign debt lawyer in London and New York, and 452 00:30:05,160 --> 00:30:07,400 Speaker 1: we said aren't you worried about this happening again, this 453 00:30:07,560 --> 00:30:11,640 Speaker 1: crazy strategy, since you guys haven't changed your clauses. And 454 00:30:11,720 --> 00:30:15,040 Speaker 1: they said, no, no court in England or New York 455 00:30:15,160 --> 00:30:20,920 Speaker 1: would ever follow the crazy Brussels strategy. And Elliott Associates 456 00:30:21,080 --> 00:30:24,840 Speaker 1: ran the same strategy again against Argentina, and this time 457 00:30:24,840 --> 00:30:29,560 Speaker 1: instead of winning about a hundred million, the two billion. 458 00:30:30,560 --> 00:30:35,440 Speaker 1: And so now that fast forward to today. Basically every 459 00:30:35,520 --> 00:30:41,520 Speaker 1: international issuer in the sovereign debt market changed their clauses 460 00:30:42,000 --> 00:30:46,280 Speaker 1: in order to preempt this strategy. And they did this 461 00:30:46,520 --> 00:30:50,160 Speaker 1: around two thousand and fourteen, I mean time of CRIMEA 462 00:30:51,120 --> 00:30:54,600 Speaker 1: and Mark and I Mark and correct me. I thought 463 00:30:54,960 --> 00:30:57,480 Speaker 1: this is the end of this story. In fact, many 464 00:30:57,600 --> 00:31:00,440 Speaker 1: articles were written about this is the end of the story. 465 00:31:00,680 --> 00:31:06,440 Speaker 1: Turns out the Russian bonds have the old parti passu clause, 466 00:31:07,080 --> 00:31:10,880 Speaker 1: the old one that Elliott won on. And I mean, 467 00:31:10,960 --> 00:31:13,640 Speaker 1: I can't help but think it's either the Russians were 468 00:31:13,760 --> 00:31:16,240 Speaker 1: so arrogant that they thought they would never get sued, 469 00:31:17,280 --> 00:31:21,000 Speaker 1: or somebody goofed. Now there are other goofs in the 470 00:31:21,200 --> 00:31:24,000 Speaker 1: in the specific party pass clause, and we can't tell 471 00:31:24,040 --> 00:31:27,520 Speaker 1: whether they're intentional or not. But the key point is 472 00:31:28,200 --> 00:31:34,320 Speaker 1: if I were an institution like Elliott and although they've 473 00:31:34,360 --> 00:31:38,240 Speaker 1: become more respectable now, I would read this clause and say, hey, 474 00:31:38,320 --> 00:31:41,520 Speaker 1: I can run this again. I don't know what you 475 00:31:41,560 --> 00:31:45,520 Speaker 1: guys think, but for me, this is so fantastic. Well 476 00:31:45,840 --> 00:31:47,480 Speaker 1: you just on that note. I mean, it does seem 477 00:31:47,520 --> 00:31:50,800 Speaker 1: like there was a change to the peripass you clause 478 00:31:51,000 --> 00:31:55,760 Speaker 1: where they deleted the idea that the peripassy would would 479 00:31:55,800 --> 00:31:59,040 Speaker 1: sort of apply in the future, and it seems like 480 00:31:59,120 --> 00:32:04,040 Speaker 1: they altered the language to suggest that it just applies 481 00:32:04,080 --> 00:32:09,040 Speaker 1: at one point of time. What does that mean exactly? 482 00:32:09,200 --> 00:32:12,000 Speaker 1: Like it seems like the implication would be that the 483 00:32:12,040 --> 00:32:18,160 Speaker 1: government could subordinate some investors at a later date. Okay, 484 00:32:18,200 --> 00:32:21,800 Speaker 1: so you're really getting into the weeds of the subcrivision, 485 00:32:21,880 --> 00:32:26,800 Speaker 1: and I that I'm enjoying sitting back and listening hearing 486 00:32:26,880 --> 00:32:31,320 Speaker 1: Tracy's expertise. Are questions. So normally the Perry Patsu clause 487 00:32:31,400 --> 00:32:36,760 Speaker 1: that nobody understands says the bonds rank and will rank 488 00:32:37,360 --> 00:32:41,480 Speaker 1: equally with all other debt, and let's not talk about 489 00:32:41,560 --> 00:32:44,640 Speaker 1: all of them. So again, rank and will rank. So 490 00:32:44,720 --> 00:32:48,640 Speaker 1: it's a representation at the time the bond is they 491 00:32:48,640 --> 00:32:53,080 Speaker 1: shoot saying they all rank equally now, and then it 492 00:32:53,160 --> 00:32:56,280 Speaker 1: says in the future, we will continue to make sure 493 00:32:56,360 --> 00:33:02,040 Speaker 1: they rank equally. In the Russian clause, it says basically, 494 00:33:02,320 --> 00:33:07,040 Speaker 1: the bonds rank equally. They deleted the words having to 495 00:33:07,080 --> 00:33:10,600 Speaker 1: do with the future the will rank now. I think 496 00:33:10,600 --> 00:33:13,680 Speaker 1: the question for court will be do we read it 497 00:33:13,800 --> 00:33:17,040 Speaker 1: as the bond just saying they ranked equally at the 498 00:33:17,120 --> 00:33:20,480 Speaker 1: time of issue, which makes the whole pari passu clause 499 00:33:20,800 --> 00:33:24,840 Speaker 1: gibberish meaningless because the whole point of the clauses that 500 00:33:24,920 --> 00:33:30,440 Speaker 1: it protects you against future misbehavior by the sovereign. Or 501 00:33:30,800 --> 00:33:32,720 Speaker 1: is the court going to say, oh, that looks like 502 00:33:32,760 --> 00:33:35,520 Speaker 1: a typo. And it also doesn't make sense with they 503 00:33:35,520 --> 00:33:38,160 Speaker 1: have events of default saying it is an event of 504 00:33:38,200 --> 00:33:41,440 Speaker 1: default if the bonds no longer ranked pari passu. So 505 00:33:41,640 --> 00:33:45,760 Speaker 1: I mean there are these giant inconsistencies in the document 506 00:33:45,840 --> 00:33:48,200 Speaker 1: and the court's going to have to decide. And of 507 00:33:48,200 --> 00:33:50,040 Speaker 1: course this goes back to the fact that we have 508 00:33:50,120 --> 00:33:53,320 Speaker 1: no idea which court uh, but a court is going 509 00:33:53,360 --> 00:33:55,800 Speaker 1: to have to decide are these typos or aren't these 510 00:33:56,240 --> 00:33:59,880 Speaker 1: brilliant strategic moves by the Russians to make sure they 511 00:34:00,040 --> 00:34:03,960 Speaker 1: never have liability. My guesses and Elliott associates would be 512 00:34:04,000 --> 00:34:09,040 Speaker 1: able to make a good argument, but again it's not clear. Tracy, 513 00:34:09,160 --> 00:34:14,200 Speaker 1: I mean you you have pointed out a very crucial 514 00:34:14,920 --> 00:34:18,799 Speaker 1: portion of this truly obscure clause, the deletion of some 515 00:34:19,400 --> 00:34:23,480 Speaker 1: two words that that could be valued at a few 516 00:34:23,480 --> 00:34:36,360 Speaker 1: billion dollars. Thinking about going back, I think about the 517 00:34:36,440 --> 00:34:40,520 Speaker 1: Argentina uh Legal Fund and obviously dragged on several years. 518 00:34:41,360 --> 00:34:44,360 Speaker 1: As we've been talking about. Russia is a unique situation 519 00:34:44,400 --> 00:34:47,120 Speaker 1: because it's already just in the last few weeks, become 520 00:34:47,239 --> 00:34:49,799 Speaker 1: so cut off from the world, far more than even 521 00:34:49,880 --> 00:34:51,879 Speaker 1: we would expect to see from a sovereign debt. Is sure, 522 00:34:52,280 --> 00:34:55,360 Speaker 1: how much do some of the consequences and legal questions 523 00:34:55,400 --> 00:34:58,920 Speaker 1: that you're talking about intellect in the last few answers? 524 00:34:59,360 --> 00:35:03,080 Speaker 1: How much do they essentially only become relevant in a 525 00:35:03,200 --> 00:35:08,320 Speaker 1: future world down the down the line, when perhaps under 526 00:35:08,360 --> 00:35:12,000 Speaker 1: a different UH Russian president who knows, but it's hard 527 00:35:12,040 --> 00:35:15,160 Speaker 1: to see them in the existing one. Russia makes an 528 00:35:15,200 --> 00:35:18,640 Speaker 1: attempt to sort of rejoin the financial world in good 529 00:35:18,719 --> 00:35:21,319 Speaker 1: standing because obviously in the current moment, you know, no 530 00:35:21,320 --> 00:35:23,440 Speaker 1: one is going to be buying new Russian dead and 531 00:35:23,560 --> 00:35:26,239 Speaker 1: basically it's cut off from financially, but there could be 532 00:35:26,280 --> 00:35:28,680 Speaker 1: a point point ten years from now or five years 533 00:35:28,680 --> 00:35:33,280 Speaker 1: from now where a different Russian government wants to become 534 00:35:33,360 --> 00:35:36,200 Speaker 1: part of the global market. Again, how much do these 535 00:35:36,280 --> 00:35:39,560 Speaker 1: questions essentially become relevant? Is well, the they're going to 536 00:35:39,640 --> 00:35:43,319 Speaker 1: have to resolve these legal fights by then in order 537 00:35:43,400 --> 00:35:47,080 Speaker 1: to rejoin the financial system. I mean, I think this 538 00:35:47,160 --> 00:35:51,400 Speaker 1: is not just a great question, it's the question that 539 00:35:52,239 --> 00:35:57,520 Speaker 1: determines whether going to court and playing the litigation game 540 00:35:58,160 --> 00:36:01,600 Speaker 1: is worthwhile. The Argentina example is a great one because 541 00:36:01,640 --> 00:36:05,239 Speaker 1: it was not just a few years, it was fifteen years. 542 00:36:05,640 --> 00:36:09,600 Speaker 1: The first big chunk of that was spent chasing Argentina's 543 00:36:09,600 --> 00:36:12,960 Speaker 1: assets around the world and coming up mostly empty handed. 544 00:36:13,400 --> 00:36:17,120 Speaker 1: And then everything came to a head with this pari 545 00:36:17,200 --> 00:36:20,400 Speaker 1: passue litigation that me too was talking about. But the 546 00:36:20,480 --> 00:36:24,280 Speaker 1: reason it all worked, the reason it produced a big 547 00:36:24,560 --> 00:36:27,160 Speaker 1: payout at the end of the day, is because there 548 00:36:27,200 --> 00:36:30,400 Speaker 1: was a change in government and because Argentina wanted to 549 00:36:30,480 --> 00:36:34,279 Speaker 1: normalize its financial and commercial relationships with the rest of 550 00:36:34,280 --> 00:36:37,839 Speaker 1: the world. So I guess the question is this, do you, 551 00:36:38,320 --> 00:36:41,120 Speaker 1: if I'm an investor, do I think Russia is going 552 00:36:41,160 --> 00:36:45,600 Speaker 1: to want to normalize those relationships, or do I expect 553 00:36:46,000 --> 00:36:49,280 Speaker 1: to be looking at Fortress Russia for the next fifteen 554 00:36:49,360 --> 00:36:52,480 Speaker 1: or twenty years, Because if it's the latter, I can 555 00:36:52,520 --> 00:36:55,440 Speaker 1: have all the enforcement rights in the world that I 556 00:36:55,440 --> 00:36:58,239 Speaker 1: could have the best written contract that gives me the 557 00:36:58,239 --> 00:37:00,920 Speaker 1: most potent set of enforcement rights in the world. But 558 00:37:01,560 --> 00:37:04,400 Speaker 1: unless I get lucky, I'm not going to get paid. 559 00:37:05,040 --> 00:37:08,920 Speaker 1: And one thing's for sure, most investors will not get paid. 560 00:37:09,080 --> 00:37:12,280 Speaker 1: The only way you get paid is when the country 561 00:37:12,320 --> 00:37:15,640 Speaker 1: wants to normalize its relations Can we maybe talk a 562 00:37:15,680 --> 00:37:19,800 Speaker 1: little bit about Ukrainian debt and what we might expect 563 00:37:19,840 --> 00:37:22,360 Speaker 1: to see there as well, because a lot of the 564 00:37:22,400 --> 00:37:24,960 Speaker 1: focus has naturally been on Russia. It has a lot 565 00:37:24,960 --> 00:37:27,560 Speaker 1: of issuance. It seems like there's a very big question 566 00:37:27,560 --> 00:37:29,439 Speaker 1: mark over whether or not it's going to be able 567 00:37:29,600 --> 00:37:33,239 Speaker 1: to pay out on what it owes. But Ukraine has 568 00:37:33,320 --> 00:37:37,160 Speaker 1: issued in the market as well, and also is presumably 569 00:37:37,480 --> 00:37:43,200 Speaker 1: financially and perhaps operationally strange strained given uh it's fighting 570 00:37:43,360 --> 00:37:46,560 Speaker 1: against Russia at the moment, So what happens there? In 571 00:37:46,600 --> 00:37:51,040 Speaker 1: some ways this is the bigger and more interesting question 572 00:37:52,440 --> 00:38:00,200 Speaker 1: to me Ukraine has, if I'm not mistaken, almost aboul. 573 00:38:00,200 --> 00:38:03,600 Speaker 1: The amount of sovereign debt that Russia has somewhere in 574 00:38:03,719 --> 00:38:07,560 Speaker 1: the range of nine plus billion dollars worth of debt, 575 00:38:07,840 --> 00:38:13,440 Speaker 1: and they were already in trouble before the invasion. Right now, 576 00:38:13,920 --> 00:38:17,320 Speaker 1: I mean now that that they have, by estimates hundred 577 00:38:17,360 --> 00:38:20,879 Speaker 1: billion dollars plus in damage to their country, and they're 578 00:38:20,920 --> 00:38:27,239 Speaker 1: desperately spending their money and defending themselves. It seems for 579 00:38:27,400 --> 00:38:30,000 Speaker 1: sure that they are going to go into default. But 580 00:38:30,280 --> 00:38:37,120 Speaker 1: there are another couple of complicated questions here. Complicated because 581 00:38:37,160 --> 00:38:40,799 Speaker 1: the relevant law goes back again to two hundred years ago. 582 00:38:41,960 --> 00:38:45,160 Speaker 1: One of which is, at some point Russia has taken 583 00:38:45,239 --> 00:38:50,440 Speaker 1: over in its invasion so much of Ukraine that the 584 00:38:50,520 --> 00:38:56,200 Speaker 1: debt becomes Russian debt, and at that point investors are 585 00:38:56,200 --> 00:38:59,560 Speaker 1: going to have to sue Russia for the debt. And 586 00:38:59,719 --> 00:39:04,520 Speaker 1: one other complications in this is what happens to the 587 00:39:04,640 --> 00:39:08,399 Speaker 1: debt that Ukraine is desperately trying to raise right now 588 00:39:09,320 --> 00:39:12,160 Speaker 1: in order to fight the Russians. Does does Russia have 589 00:39:12,280 --> 00:39:16,040 Speaker 1: to pay that debt as well after it takes over 590 00:39:16,080 --> 00:39:20,239 Speaker 1: the Ukraine. It's not clear. The old international law actually 591 00:39:20,320 --> 00:39:26,000 Speaker 1: said that Russia might not have to pay that debt. 592 00:39:26,880 --> 00:39:30,520 Speaker 1: That strikething as completely antiquated and wrong, But that is 593 00:39:30,640 --> 00:39:35,440 Speaker 1: what the old law would have said. Ukraine obviously needs 594 00:39:35,520 --> 00:39:41,600 Speaker 1: money to fight to defend itself right now, and suppose, 595 00:39:41,760 --> 00:39:45,480 Speaker 1: you know, the war comes to an end in Ukraine, 596 00:39:45,600 --> 00:39:49,719 Speaker 1: sovereignty is intact. Is that debt treated just like any 597 00:39:49,760 --> 00:39:52,279 Speaker 1: other debt that would be issued in normal times? Are 598 00:39:52,280 --> 00:39:55,319 Speaker 1: the opportunities for forgiveness of that debt? Are there other 599 00:39:55,360 --> 00:39:59,319 Speaker 1: ways that it can raise money beyond debt markets such 600 00:39:59,360 --> 00:40:02,120 Speaker 1: that it doesn't impose the future financial burden? Is that 601 00:40:02,280 --> 00:40:06,800 Speaker 1: what is the optimal way to fund its defense efforts 602 00:40:06,880 --> 00:40:11,560 Speaker 1: internationally without creating this huge future burden? So me too 603 00:40:11,600 --> 00:40:15,960 Speaker 1: may have more developed thoughts on this than I do. 604 00:40:16,560 --> 00:40:19,880 Speaker 1: My initial reaction, first of all, is that this is 605 00:40:19,880 --> 00:40:23,880 Speaker 1: a relatively happy set of circumstances, and so I only 606 00:40:23,880 --> 00:40:25,960 Speaker 1: hope that this is the problem we're dealing with down 607 00:40:26,040 --> 00:40:31,440 Speaker 1: the road, going to commercial creditors and asking them for 608 00:40:32,280 --> 00:40:36,799 Speaker 1: concessional treatment to get you back on your feet after 609 00:40:36,880 --> 00:40:40,479 Speaker 1: something like this, You know, surely there's going to be 610 00:40:40,600 --> 00:40:43,200 Speaker 1: a restructuring. There would need to be a restructuring, and 611 00:40:43,280 --> 00:40:47,560 Speaker 1: I would imagine that commercial creditors might be a little 612 00:40:47,600 --> 00:40:51,240 Speaker 1: bit more willing to participate than in the normal case. 613 00:40:51,719 --> 00:40:54,480 Speaker 1: But you know, I don't see any way that you 614 00:40:55,000 --> 00:40:59,600 Speaker 1: even begin to restructure the debt that Ukraine has much 615 00:40:59,680 --> 00:41:04,960 Speaker 1: less begin the process of rebuilding without massive concessional and 616 00:41:05,040 --> 00:41:08,719 Speaker 1: official finance. And surely the private sector has a role 617 00:41:08,760 --> 00:41:11,480 Speaker 1: in that. But but I I think it's a relatively 618 00:41:11,520 --> 00:41:14,319 Speaker 1: small one. Me too. Maybe you have a different view. No, 619 00:41:14,480 --> 00:41:17,560 Speaker 1: I mean there are two questions, and Joe, I hope 620 00:41:17,560 --> 00:41:20,799 Speaker 1: I'm not misunderstanding you. I think the two questions are one, 621 00:41:21,320 --> 00:41:25,600 Speaker 1: what happens now if the bond markets, the private bond 622 00:41:25,640 --> 00:41:30,160 Speaker 1: markets are reluctant to fund Ukraine? And then the other 623 00:41:30,280 --> 00:41:33,719 Speaker 1: question is what happens after all of this blows over, 624 00:41:33,880 --> 00:41:37,440 Speaker 1: assuming Russia doesn't take over all of Ukraine? What happens 625 00:41:37,480 --> 00:41:42,560 Speaker 1: to Ukraine? There? I think? And maybe I'm just echoing 626 00:41:42,640 --> 00:41:48,760 Speaker 1: what Markus saying. I think in both cases, the official sector, 627 00:41:49,840 --> 00:41:55,279 Speaker 1: meaning mostly Western Europe and the United States, needs to 628 00:41:55,440 --> 00:42:00,239 Speaker 1: step in and provide the support a provide support out 629 00:42:00,280 --> 00:42:03,279 Speaker 1: because the private markets are going to be reluctant to 630 00:42:03,400 --> 00:42:07,319 Speaker 1: support Ukraine and be promised to support them after the 631 00:42:07,400 --> 00:42:12,720 Speaker 1: fact in the restructuring that is surely not their fault. Yes, 632 00:42:12,800 --> 00:42:16,799 Speaker 1: they're precarious, but they were they're precarious because of the 633 00:42:16,840 --> 00:42:21,440 Speaker 1: invasion of of Crimea, and after that invasion, the official 634 00:42:21,520 --> 00:42:25,759 Speaker 1: sector didn't really say this is not your fault, we're 635 00:42:25,760 --> 00:42:28,560 Speaker 1: gonna help you in a big way. They made Ukraine 636 00:42:28,600 --> 00:42:33,400 Speaker 1: deal with the private creditors and Ukraine actually got pretty 637 00:42:33,640 --> 00:42:39,320 Speaker 1: harsh treatment in that restructuring after the two thousand fourteen invasion. 638 00:42:39,600 --> 00:42:41,759 Speaker 1: I think this time we need, we need the rest 639 00:42:41,760 --> 00:42:44,640 Speaker 1: of the world needs to do a lot better of 640 00:42:44,800 --> 00:42:48,160 Speaker 1: visa b Ukraine. But those decisions have not been made. 641 00:42:48,200 --> 00:42:50,879 Speaker 1: I mean that this is this has just all been 642 00:42:51,000 --> 00:42:56,240 Speaker 1: left up in the air, as if nobody's really thinking ahead. 643 00:42:56,840 --> 00:42:59,319 Speaker 1: Met too. I think that's a good place to leave 644 00:42:59,360 --> 00:43:02,760 Speaker 1: an Obviously, there are so many questions around this entire situation. 645 00:43:02,800 --> 00:43:05,719 Speaker 1: It's going to be absolutely fascinating to see how it 646 00:43:05,760 --> 00:43:08,399 Speaker 1: all plays out. So thank you to you and Mark 647 00:43:08,440 --> 00:43:11,640 Speaker 1: as well for coming back on the show. Thanks, thank you, 648 00:43:11,680 --> 00:43:14,880 Speaker 1: thanks for having us well, Joe. I found that conversation 649 00:43:14,920 --> 00:43:18,920 Speaker 1: absolutely fascinating and clearly there are a lot of threads 650 00:43:19,000 --> 00:43:23,239 Speaker 1: to follow. But you know, one kind of crazy thing 651 00:43:23,280 --> 00:43:26,400 Speaker 1: to think about is that I mentioned that nineteen eighteen 652 00:43:26,680 --> 00:43:29,800 Speaker 1: debt when we started. I mean, some people are still 653 00:43:29,840 --> 00:43:33,279 Speaker 1: holding certificates, you know, stored in their addicts you can 654 00:43:33,320 --> 00:43:35,520 Speaker 1: buy them off eBay and things like that, and still 655 00:43:36,000 --> 00:43:38,280 Speaker 1: waiting for a payout and thinking it's going to happen. 656 00:43:38,520 --> 00:43:41,200 Speaker 1: And so it's kind of weird to think that maybe 657 00:43:41,280 --> 00:43:43,560 Speaker 1: we're in a similar situation now where people are going 658 00:43:43,600 --> 00:43:46,800 Speaker 1: to be holding onto Russian bonds and waiting for a 659 00:43:46,840 --> 00:43:50,560 Speaker 1: payout a hundred years from now. Eb the real OTC, 660 00:43:51,960 --> 00:43:55,759 Speaker 1: the original or maybe the original electronic bond marketplace. But no, 661 00:43:55,960 --> 00:43:59,160 Speaker 1: in all seriousness, like that's sort of a century is 662 00:43:59,200 --> 00:44:02,080 Speaker 1: a very long time. But it does seem like in 663 00:44:02,200 --> 00:44:06,480 Speaker 1: many cases for the investors that you know, are looking 664 00:44:06,520 --> 00:44:09,319 Speaker 1: for a big pay day, the bet is years and 665 00:44:09,440 --> 00:44:13,080 Speaker 1: years down the road, because it really does seem, uh, 666 00:44:13,120 --> 00:44:16,240 Speaker 1: there's very little prospect of some sort of I think, 667 00:44:16,280 --> 00:44:18,200 Speaker 1: I mean, I think a lot of people think that 668 00:44:18,200 --> 00:44:21,520 Speaker 1: that as long as the current government is in place 669 00:44:21,600 --> 00:44:25,120 Speaker 1: in Russia that there's going to be some big reproach, approach, 670 00:44:25,120 --> 00:44:27,879 Speaker 1: a mint and reintegration. I mean, there may be some 671 00:44:28,120 --> 00:44:33,760 Speaker 1: dropping of the sanctions after the war, hopefully hopefully positive outcome, 672 00:44:34,000 --> 00:44:36,440 Speaker 1: but it is hard to imagine a complete rollback, right 673 00:44:36,480 --> 00:44:40,880 Speaker 1: and going back to the early status quo, and as such, 674 00:44:41,080 --> 00:44:44,320 Speaker 1: it may be that some of the big big pad 675 00:44:44,400 --> 00:44:47,359 Speaker 1: could be fifteen twenty years, who knows how long, how 676 00:44:47,400 --> 00:44:50,040 Speaker 1: far into the future totally. But the other thing that 677 00:44:50,080 --> 00:44:52,319 Speaker 1: this all reminded me of, and I think I've touched 678 00:44:52,360 --> 00:44:55,720 Speaker 1: on this in various works before, but this idea that bonds, 679 00:44:55,840 --> 00:44:59,920 Speaker 1: ultimately they have so many, so much morality and values 680 00:45:00,080 --> 00:45:02,680 Speaker 1: sort of embedded in them, and they all have a story, right, 681 00:45:02,760 --> 00:45:05,640 Speaker 1: like these bonds were issued because of this, and it 682 00:45:05,719 --> 00:45:08,439 Speaker 1: means I owe money to this person because of that. 683 00:45:09,080 --> 00:45:11,920 Speaker 1: And when the story starts to shift and when the 684 00:45:12,040 --> 00:45:15,000 Speaker 1: values we attached to that debt start to shift, which 685 00:45:15,040 --> 00:45:17,359 Speaker 1: is arguably what we're seeing with Russia now. You know, 686 00:45:17,480 --> 00:45:20,520 Speaker 1: three weeks ago, Russia was investment grade and it was 687 00:45:20,560 --> 00:45:25,280 Speaker 1: considered obviously not a pristine player on the international stage, 688 00:45:25,480 --> 00:45:29,000 Speaker 1: but acceptable for people to do business with. And that 689 00:45:29,040 --> 00:45:32,640 Speaker 1: has just completely changed in less than a month. I 690 00:45:32,680 --> 00:45:34,759 Speaker 1: think that's a that's a really good point, and the 691 00:45:34,800 --> 00:45:37,600 Speaker 1: idea of the sort of our once a new story 692 00:45:37,960 --> 00:45:41,120 Speaker 1: is attached, then perhaps the law follows. And so a 693 00:45:41,160 --> 00:45:44,319 Speaker 1: good example that could be sort of this question of 694 00:45:44,360 --> 00:45:48,560 Speaker 1: all right, our oligarch assets held abroad, can they be 695 00:45:48,680 --> 00:45:52,280 Speaker 1: seized and liquidated for the benefit of creditors? And maybe 696 00:45:52,600 --> 00:45:55,360 Speaker 1: that has been very legally difficult to do in the past. 697 00:45:55,640 --> 00:46:00,000 Speaker 1: But already, as our guests discussed, in the last few weeks, 698 00:46:00,239 --> 00:46:03,799 Speaker 1: we've seen a rethinking of certain Western government to the 699 00:46:03,840 --> 00:46:07,440 Speaker 1: idea of seizing and liquidating oligarch assets. And as such, 700 00:46:07,560 --> 00:46:10,640 Speaker 1: maybe what seemed to be an impossible veil to appears 701 00:46:10,800 --> 00:46:14,600 Speaker 1: previously may suddenly be possible. It just changes the environment. 702 00:46:14,680 --> 00:46:18,040 Speaker 1: This is exactly it. And not just liquidated to satisfy creditors, 703 00:46:18,080 --> 00:46:20,400 Speaker 1: but could they for instance, Mark sort of hinted at this, 704 00:46:20,440 --> 00:46:23,680 Speaker 1: could they be liquidated to fund some sort of you know, 705 00:46:23,840 --> 00:46:27,120 Speaker 1: war aid or compensation for people in Ukraine? And then 706 00:46:27,120 --> 00:46:30,000 Speaker 1: and then again right, and the fascinating question of whether 707 00:46:30,400 --> 00:46:35,640 Speaker 1: Russia itself may be a creditor for debt being currently 708 00:46:35,680 --> 00:46:40,919 Speaker 1: incurred by Ukraine's government is a fascinating question. The other 709 00:46:41,000 --> 00:46:44,760 Speaker 1: thing that I found really striking is this idea that 710 00:46:45,560 --> 00:46:50,160 Speaker 1: again after the annexation of Crimea, Russia seemed to pay 711 00:46:50,200 --> 00:46:53,040 Speaker 1: no penalty. In fact that even that it's stipulated in 712 00:46:53,200 --> 00:46:56,279 Speaker 1: it put in this new language about possible sanctions, and 713 00:46:56,360 --> 00:46:59,520 Speaker 1: yet it was still considered the bonds were trading strongly. 714 00:47:00,000 --> 00:47:04,560 Speaker 1: This idea that after this incident that almost nothing fundamentally 715 00:47:04,680 --> 00:47:13,200 Speaker 1: changed is incredibly striking and almost maybe shameful. Sever Yeah, um, well, 716 00:47:14,040 --> 00:47:15,680 Speaker 1: I feel like we could talk about this for another 717 00:47:15,719 --> 00:47:18,200 Speaker 1: four hours, but shall we leave it there? Let's leave 718 00:47:18,200 --> 00:47:20,520 Speaker 1: it there, all right? This has been another episode of 719 00:47:20,520 --> 00:47:23,240 Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow 720 00:47:23,280 --> 00:47:26,279 Speaker 1: me on Twitter at Tracy Alloway and I'm Joey Isn't All. 721 00:47:26,360 --> 00:47:29,840 Speaker 1: You can follow me on Twitter at the Stalwart. Big 722 00:47:29,840 --> 00:47:33,920 Speaker 1: thanks to our producers Magnus Hendrickson and Colm Tipton. Followed 723 00:47:33,920 --> 00:47:37,480 Speaker 1: the Bloomberg head of podcast, Francisca Levi at Francesca Today 724 00:47:37,680 --> 00:47:41,399 Speaker 1: and check out all of our podcasts and Bloomberg under 725 00:47:41,440 --> 00:47:43,840 Speaker 1: the handle and podcasts. Thanks for listening,