West Seeks a More Effective Way to Tighten Sanctions on Russia

Credit…Maxim Shemetov/Reuters

Russia missed a deadline for making bond payments on Sunday, a move signaling its first default on international debt in more than a century, after Western sanctions thwarted the government’s efforts to pay foreign investors. The lapse adds to efforts to seal Moscow off from global capital markets for years.

About $100 million in dollar- and euro-denominated interest payments failed to reach investors within a 30-day grace period after a missed May 27 deadline. The grace period expired Sunday night.

A formal declaration of default would need to come from bondholders because ratings agencies, which normally declare when borrowers have defaulted, have been barred by sanctions from reporting on Russia. The Credit Derivatives Determinations Committee, a panel of investors that rules on whether to pay out securities linked to defaults, hasn’t been asked to make a decision on these bond payments yet.

But it appeared that the payments had not reached bondholders’ accounts as of Sunday night, as required by the bonds’ contracts. On Monday, Russia’s finance ministry said that it had made the payments in May and that they had been transferred to Euroclear, a Brussels-based clearinghouse, but subsequently blocked from reaching bondholders.

Russia is rejecting the default declaration, on the grounds that it has made efforts to pay. Dmitri S. Peskov, the Kremlin’s spokesman, told reporters on Monday that the statements about default were “absolutely illegal.”

“The fact that Euroclear withheld this money, did not transfer it to the recipients, it is not our problem,” Mr. Peskov said. “In other words, there are no grounds to call this situation a default.”

The finance ministry added that the actions of foreign financial institutions were beyond its control and that “it seems advisable for investors to contact the relevant financial institutions directly” over the payments.

Euroclear declined to comment.

“We can expect Russia to stick to its alternative narrative: The default isn’t a default, we tried and it isn’t our fault,” said Tim Samples, a legal studies professor at the University of Georgia’s Terry College of Business and an expert on sovereign debt, adding that Russia also hasn’t submitted to jurisdiction in foreign courts. Still, “that has to be a bit humiliating, even for a country that can survive and maintain a war on its hydrocarbon revenues,” he said.

The risk of default emerged in late February after Russia invaded Ukraine and sanctions were imposed to sever the country from international financial markets. In late May, Russia tried to navigate tightening sanctions that cut off its access to American banks and bondholders by sending the payments to a Moscow-based institution. But ultimately, the funds didn’t make it all the way to bondholders’ accounts because of far-reaching American and European sanctions.

News of Monday’s apparent default showed “just how strong” international sanctions against Russia have been, a senior U.S. administration official said in a background briefing for reporters at the Group of 7 summit in Germany, highlighting the “dramatic” effect on Russia’s economy.

This default is unusual because it’s a result of economic sanctions blocking transactions, not because the Russian government has run out of money. Moscow’s finances remain resilient after months of war, with nearly $600 billion in foreign currency and gold reserves, though about half of that is frozen overseas. And Russia continues to receive a steady influx of cash from sales of oil and gas. Still, a default would be a stain on the country’s reputation that will linger in investors’ memories and probably push up its borrowing costs if it is able to tap international capital markets.

Unlike other major defaults in recent history, such as in Greece and Argentina, this default is expected to have a relatively small impact on international markets and Russia’s budget. For one thing, Russia has already lost access to international investors, traditionally the worst consequence of default.

“The only clear negative outcome of the default is that the external market will be effectively closed for the ministry of finance,” said Sofya Donets, an economist at Renaissance Capital in Moscow. “But it’s already closed.”

The head of Russia’s central bank, Elvira Nabiullina, said this month that there wouldn’t be any immediate consequences of a default because there had already been an outflow of investors and a drop in the value of Russia’s assets. The central bank is more concerned about inflation, most recently at about 17 percent, and supporting the economy through a “large-scale structural transformation” after an exodus of foreign companies and imports.

The Western sanctions alone are expected to block Russia from large parts of international capital markets for a long time. Regardless, Russia has been reluctant to give up its reputation as a reliable borrower, which was hard won after its economic collapse in 1998, when the government defaulted on ruble-denominated bonds amid a currency crisis.

Last month, Russia insisted that it had fulfilled its debt obligations by sending funds to its payment agent in Moscow, the National Settlement Depository. Since then, the depository has fallen under European sanctions, further restricting Russia’s ability to pay bondholders. The finance minister, Anton Siluanov, has accused the West of artificially manufacturing a default and has threatened legal action against U.S. authorities.

This is Russia’s first major default on foreign debt since 1918, soon after the Bolshevik Revolution.

On Wednesday, President Vladimir V. Putin signed a decree saying that future payments to holders of debt denominated in dollars or euros would be made through Russian financial institutions and that the obligations would be considered met if paid in rubles and converted. Most of the bond contracts don’t allow for payment in rubles.

Over the following two days, nearly $400 million in dollar-denominated debt payments were due from bonds that had 30-day and 15-day grace periods. The finance ministry said it had sent the payments, in rubles, using the new procedure laid out by the presidential decree. But it remains unclear how foreign investors will gain access to the funds.

Overseas investors held about half of Russia’s $40 billion in outstanding foreign-currency debt at the end of last year. As the risk of default grew this year, PIMCO, the investment management firm, saw the value of its Russian bond holdings decline by more than $1 billion, and pension funds and mutual funds with exposure to emerging market debt have also experienced declines.

But exposure to Russian assets is limited in the United States and Europe because sanctions imposed since Russia’s annexation of Crimea in 2014 have discouraged investors who didn’t want the geopolitical risk.

By international standards, Russia doesn’t have that much debt. Its public debt was only about 17 percent of gross domestic product last year, according to the International Monetary Fund, one of just a handful of countries with debt ratios under 25 percent. The United States, whose assets are in demand among global investors and deemed low risk, has a debt ratio of 125 percent of G.D.P.

Russia’s low debt levels are partly a result of “this new geopolitical era” since the annexation of Crimea, Ms. Donets said. “But it’s also a product of the default of 1998,” she added, when “the ministry of finance was burned badly.” Since then, the ministry has not been that active in issuing new foreign-currency debt, she said.

Russia hasn’t relied on borrowing from international investors for its budget. The finance ministry hasn’t issued dollar-denominated debt since 2019, when U.S. sanctions barred American banks from buying the debt directly. It last issued euro-denominated debt in May 2021.

Instead, Russia has depended on its oil and gas exports, and those dollar revenues that went into reserves and grew the national wealth fund.

“Why would you borrow and pay additional rates when you are a country that is accumulating oil funds, accumulating in hard currency, a country which has $600 billion in reserves?” Ms. Donets said.

The war hasn’t changed that calculation. Russia’s current account surplus, a broad measure of trade and investment, has soared as revenues from energy exports jumped, capital controls stopped investments fleeing and sanctions slashed imports. It has helped push the ruble to its highest level in seven years.

If Russia does issue more debt, it will lean on local banks and residents in the short term to buy ruble-denominated bonds.

Russia “will have no access to the capital markets until the war stops and the sanctions are lifted,” said Richard Portes, an economics professor at the London School of Business.

The long-term consequences of a default are unclear because of the unusual nature of the financial breach. But it’s possible to envision a future where Russia is able to sell debt on international markets again, analysts say, if the war ends and Russia’s geopolitical ambitions change. Without Mr. Putin and with hundreds of billions of dollars in international reserves unfrozen, it could return to markets.

“Capital market access can be restored very quickly,” Mr. Portes said. “Once Russia is back in good political graces and sanctions are lifted.”

“If it’s not a political pariah, it won’t be an economic pariah,” he added.

Reporting was contributed by Ivan Nechepurenko, Andrés R. Martínez, Jim Tankersley and Alan Rappeport.

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KB Home Announces the Grand Opening of Two New-Home Communities at the Company’s Highly Desirable Shadow Mountain Master Plan

MENIFEE, Calif.–(BUSINESS WIRE)–KB Home (NYSE: KBH) today announced the grand opening of two new-home communities at the company’s highly desirable Shadow Mountain master plan in Menifee, California. Oak Shade and Durango feature spacious single-family homes in a prime Riverside County location. The new neighborhoods are situated near the McCall Boulevard exit off Interstate 215, providing easy access to the area’s major employment centers as well as shopping, dining and entertainment at both Menifee Countryside Marketplace and Menifee Town Center. Oak Shade and Durango are also just minutes away from Mt. San Jacinto College and Brandman University. Future community amenities include a children’s playground, soccer field, basketball court, numerous parks and walking, biking and hiking trails.

Oak Shade at Shadow Mountain offers a wide selection of one- and two-story homes that blend attractive design features like beautiful kitchens and large bedroom suites with walk-in closets as well as loft spaces and covered patios. The community’s floor plans feature up to five bedrooms and three-and-a-half baths, and range in size from approximately 1,400 to 2,700 square feet. Pricing begins from the $470,000s.

The ranch-style homes at Durango at Shadow Mountain showcase desirable design characteristics like spacious kitchens overlooking large great rooms, expansive bedroom suites with walk-in closets, and ample storage space. The community’s one-story floor plans feature up to four bedrooms and two-and-a-half baths, and range in size from approximately 2,000 to 2,900 square feet. Pricing begins from the $510,000s.

“Our two new communities, Oak Shade and Durango, feature spacious single-family homes in a prime Riverside County location. The new neighborhoods are compelling additions to our highly desirable Shadow Mountain master plan, which will showcase several family friendly amenities, including a children’s playground, soccer field, basketball court, numerous parks and walking, biking and hiking trails,” said John Fenn, President of KB Home’s Inland Empire division. “As with other KB Home communities, Gilmore Grove provides home shoppers with the opportunity to purchase a new KB home that can be personalized to reflect their lifestyle and needs.”

KB Home stands out from other homebuilders as the company gives homebuyers exceptional choice and control. KB Home starts by offering a wide variety of homes at an affordable price. From there, the builder gives buyers the ability to personalize their homes from floor plans to exterior elevations, from design options to where they live in the community. The KB Home team works hand in hand with homeowners every step of the way, so they have a real partner in the process.

Every KB home is designed to be ENERGY STAR® certified thanks to the quality construction techniques and materials utilized that ultimately deliver significant savings on utility bills compared to used homes. Additionally, all new KB homes are designed to deliver an enhanced indoor environment and include high performance ventilation systems, low- or zero-VOC products and other features guided by the Environmental Protection Agency’s (EPA) Indoor airPLUS standards.

The Oak Shade and Durango at Shadow Mountain sales offices and model homes are open for walk-in visits and private in-person tours by appointment. Homebuyers also have the flexibility to arrange a live video tour with a sales counselor. Pricing begins from the $470,000s and the $510,000s, respectively.

For more information on KB Home, call 888-KB-HOMES or visit kbhome.com.

About KB Home

KB Home is one of the largest and most recognized homebuilders in the United States and has built over 655,000 quality homes in our more than 65-year history. Today, KB Home operates in 47 markets from coast to coast. What sets KB Home apart is the exceptional personalization we offer our homebuyers — from those buying their first home to experienced buyers — allowing them to make their home uniquely their own, at a price that fits their budget. As the leader in energy-efficient homebuilding, KB Home was the first builder to make every home it builds ENERGY STAR® certified, a standard of energy performance achieved by fewer than 10% of new homes in America and has built more ENERGY STAR certified homes than any other builder. An energy-efficient KB home helps lower the cost of ownership and is designed to be healthier, more comfortable and better for the environment than new homes without certification. We build strong, personal relationships with our customers, so they have a real partner in the homebuying process. As a result, we have the distinction of being the #1 customer-ranked national homebuilder in third-party buyer satisfaction surveys. Learn more about how we build homes built on relationships by visiting kbhome.com.

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Russians Crowdsource Supplies for Their Army in Ukraine

Natalia Abiyeva is a real-estate agent specializing in rental apartments in the city of Nizhny Novgorod, east of Moscow. But lately, she has been learning a lot about battlefield medicine.

Packets of hemostatic granules, she found out, can stop catastrophic bleeding; decompression needles can relieve pressure in a punctured chest. At a military hospital, a wounded commander told her that a comrade died in his arms because there were no airway tubes available to keep him breathing.

Ms. Abiyeva, 37, has decided to take matters into her own hands. On Wednesday, she and two friends set out in a van for the Ukrainian border for the seventh time since the war began in February, bringing onions, potatoes, two-way radios, binoculars, first-aid gear and even a mobile dentistry set. Since the start of the war, she said, she has raised more than $60,000 to buy food, clothes and equipment for Russian soldiers serving in Ukraine.

“The whole world, it seems to me, is supporting our great enemies,” Ms. Abiyeva said in a phone interview. “We also want to offer our support, to say, ‘Guys, we’re with you.’”

Russia, grass-roots movements, led in large part by women, have sprung up to crowdsource aid for Russian soldiers. They are evidence of some public backing for President Vladimir V. Putin’s war effort — but also of the growing recognition among Russians that their military, vaunted before the invasion as a world-class fighting force, turned out to be woefully underprepared for a major conflict.

care packages familiar to Americans from the Iraq war. The most sought-after items include imported drones and night vision scopes, a sign that Russia’s $66 billion defense budget has not managed to produce essential gear for modern warfare.

“No one expected there to be such a war,” Tatyana Plotnikova, a business owner in the city of Novokuybyshevsk on the Volga, said in a phone interview. “I think no one was ready for this.”

155-millimeter shells fired by American howitzers, and that Russia’s leadership may have underestimated the determination of the West to support Ukraine.

“It’s not making the military operation go any faster from our point of view — it’s making our situation more difficult, I don’t deny it,” Mr. Borodai said, referring to Western weapons deliveries. “It’s possible that our military leaders were not ready for there to be such massive support on the part of the West.”

benefiting from a far more extensive crowdfunding campaign that is delivering millions of dollars’ worth of donations in items like drones, night vision scopes, rifles and consumer technology.

Most of the groups collecting donations for Russian soldiers appear to be operating independently of the Russian government. They mostly rely on volunteers’ personal contacts in individual units and at military hospitals who pass along lists of what they most urgently need.

segment in April about such volunteers explained, “but a mother’s heart has a will of its own.”

Outside state media, however, supporters of the war are pointing to private donations as a key to victory. Pro-Russian military bloggers, some of them embedded with Russian troops, are urging their followers to donate money to buy night vision equipment and basic drones.

“Our guys are dying because they lack this equipment,” one blogger wrote, while “the entire West is supplying the Ukrainian side.”

The needed equipment, largely imported, can be bought at Russian sporting goods stores or ordered online. Starshe Eddy, a popular military blogger, wrote that consumer drones made by the giant Chinese company DJI “have become so firmly entrenched in combat operations that it’s become hard to imagine the war without them.”

says the item “makes seeing — and ranging — deer out to 600 yards a reality.”

wrote, adding a winking emoji and a heart emoji.

Ms. Abiyeva says she started crowdsourcing aid after her husband, a captain, was deployed to Ukraine and she felt “powerless” to affect the course of events. She visited the hospital attached to her husband’s local military base and got the contact information for surgeons deployed to the war. Ever since, they have sent requests to her directly and passed her contacts along to colleagues.

When one surgeon at a field hospital asked for arterial embolectomy catheters, for treating clogs in arteries, Ms. Abiyeva found another volunteer in St. Petersburg to make the 700-mile trip to deliver 10 of them immediately. Ms. Abiyeva said that when she met the surgeon on her own trip to the region a week later, he told her that six of the catheters had already been used.

“It’s possible that we saved six lives,” she said.

The Russian military’s apparently urgent need for essential medical equipment and basic, foreign-made consumer devices has led some Russians to wonder how the Kremlin has been spending its enormous military budget, more than 3 percent of the country’s total economic output. On the VKontakte page of Zhanna Slobozhan, a coordinator of donations in the border city of Belgorod, a woman wrote that talk of raising money for drones and gun sights “makes me think that the army is totally being abandoned to the mercy of fate.”

“Let’s make sure that at least we won’t abandon our guys,” Ms. Slobozhan wrote back. She did not respond to requests for comment.

Mr. Putin visited a military hospital on Wednesday for the first time since the war began. He later told officials that while the doctors he met had assured him that “they have all they need,” the government should “promptly, quickly and effectively respond to any needs” in military medicine.

documentary about soldiers’ mothers released last weekend by the Russian journalist Katerina Gordeyeva, seen some three million times on YouTube, one woman describes her son using a wire to reattach soles to his boots.

An association of retired Russian officers published an open letter on May 19 noting that the public was raising funds for equipment the military sorely lacked “even though the government has plenty of money.” The letter excoriated Mr. Putin’s war effort as halfhearted, urging him to declare a state of war, with the aim of capturing all of Ukraine.

But on the ground, the concerns are more prosaic. With the approach of summer, Lyme disease-bearing ticks are out, and volunteers in Belgorod have been making homemade insect repellent, putting it into spray bottles and delivering it to the front.

A group of women collecting donations in the area learned that some of the Russian-backed separatist forces were so badly equipped that they were using shopping bags to carry their belongings. In their Telegram account with about 1,000 followers, the group put out an urgent call for backpacks, along with shoes, Q-tips, socks, headlamps, lighters, hats, sugar and batteries.

“This is so they understand that they are not alone,” said one of the coordinators of the Belgorod group, Vera Kusenko, 26, who works at a beauty salon as an eyelash extension specialist. “We hope this ends soon.”

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Russia needs huge financial resources for military operation – finance minister

Tanks of pro-Russian troops drive along a street during Ukraine-Russia conflict in the town of Popasna in the Luhansk Region, Ukraine May 26, 2022. REUTERS/Alexander Ermochenko

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May 27 (Reuters) – Russia needs huge financial resources for its military operation in Ukraine, Finance Minister Anton Siluanov said on Friday, putting the amount of budget stimulus for the economy at 8 trillion roubles ($120 billion).

Russia sent tens of thousands of troops into Ukraine on Feb. 24, which prompted the West to impose sanctions against Moscow that have already fanned inflation to near 18% and pushed the country to the brink of recession.

“Money, huge resources are needed for the special operation,” Siluanov said in a lecture at a Moscow financial university.

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President Vladimir Putin this week ordered 10% rises in pensions and the minimum wage to cushion Russians from inflation, but denied the economic problems were all linked to what Russia calls “a special military operation” in Ukraine. read more

The measures would cost the federal budget around 600 billion roubles this year and about 1 trillion roubles in 2023, Siluanov said earlier this week.

In a TV interview aired late on Friday, Siluanov said Russia will receive up to 1 trillion roubles in extra oil and gas revenues this year, funds which will be channelled to pay for increased social welfare payments.

Earlier on Friday, Siluanov also defended capital controls and asset freezes for foreign investors from “unfriendly” countries that Moscow imposed in response to Western sanctions.

“We will keep the investments that were made by foreigners from unfriendly countries in Russia in the same way as they will keep our gold and forex reserves,” Siluanov said, referring to the Western move to freeze around $300 billion worth of Russia’s international reserves it had accumulated over years.

Siluanov said restrictions on capital moves for foreign investors could remain in place until either sanctions are lifted or reserves are unfrozen.

($1 = 66.5790 roubles)

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Reporting by Reuters; Editing by Angus MacSwan and Sandra Maler

Our Standards: The Thomson Reuters Trust Principles.

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Rouble extends losses after rates slashed; Eurobonds in focus

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A picture illustration shows Russian rouble banknotes of various denominations on a table in Warsaw, Poland, January 22, 2016. REUTERS/Kacper Pempel/File Photo

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May 27 (Reuters) – The Russian rouble extended its losses on Friday after plunging in the previous session as the country’s central bank slashed interest rates, signalling more cuts, and the prospect of easing capital controls and a possible sovereign default hammered the currency.

The rouble slumped around 10% to the dollar and euro on Thursday after the central bank lowered its key rate to 11%, the third 300-basis-point cut in a row, as inflation slows from more than 20-year highs. read more

As the rouble continued swinging this way and that on Friday, Prime Minister Mikhail Mishustin said the government wanted to avoid currency volatility, a sign that Moscow is not entirely comfortable with the rouble’s seemingly uncontrollable moves.

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By 1316 GMT, the rouble was 1.3% weaker against the dollar at 66.09, swinging during the session from 64.89 to a more than two-week low of 67.4950. On Wednesday, the rouble had hit its strongest level since February 2018 of 55.80 against the greenback.

Versus the euro, the rouble lost 1.4% to trade at 68.93 , sliding further away from the seven-year high of 57.10 hit on Wednesday.

Propped up by capital controls, the rouble had artificially risen to become the world’s best-performing currency so far this year until this week’s slide. New gas payment terms requiring conversion of foreign currency into roubles and a fall in imports have also helped.

But it has now lost the support of the month-end tax period that usually sees export-focused companies convert foreign currency into roubles to pay local liabilities.

ROUBLE BALANCE

Economy Minister Maxim Reshetnikov said excessive rouble appreciation posed deflation risks, adding to his comments on Thursday that the currency’s strength, which has raised concerns about the negative impact on Russia’s budget revenue from exports, was making Russian goods uncompetitive abroad.

“The rouble has to be within some reasonable limits,” he said.

Reshetnikov, who also praised the central bank’s rate cut hoping it will spur lending activity, has said he expects the mandatory proportion of foreign currency revenue that exporters must convert into roubles to be cut further from 50%.

Market eyes are focused on Russia’s National Settlement Depository (NSD), which has promised to make interest payments on Friday worth $71.25 million and 26.5 million euros ($28.5 million) on two Eurobonds , . read more

That is in spite of Washington deciding against extending a key licence that had allowed Moscow to keep paying bondholders despite the sanctions imposed over its actions in Ukraine, putting Russia on the cusp of a unique kind of debt crisis. read more

Russian stock indexes were falling.

The dollar-denominated RTS index (.IRTS) was down 2.3% at 1,153.9 points. The rouble-based MOEX Russian index (.IMOEX) was 0.2% lower at 2,406.5 points.

($1 = 0.9305 euros)

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Reporting by Reuters; Editing by Nick Macfie and Maju Samuel

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The Root of Haiti’s Misery: Reparations to Enslavers

In 1789, before the slave rebellion, the marquis bought 21 recently kidnapped Africans before leaving for France. But he didn’t indicate where they were put to work, so the commission valued them at an average rate, down to the cent: 3,366.66 francs.

In the end, it awarded Cocherel’s daughter, a newly married marquise, average annual payments of 1,450 francs, or about $280 in the 1860s, for dozens of years, according to government publications of the commission’s decisions.

By contrast, coffee farmers in Haiti were earning about $76 a year in 1863, Edmond Paul, a Haitian economist and politician, wrote at the time — barely enough to cover one meal a day of “the least substantive foods.”

It was reminiscent, he said, of slavery.

The Haitian government ran out of money right away. To finish its first payment, it emptied its state coffers, sending it all to France on a French ship, sealed in bags inside nailed crates reinforced with iron bands. That left no money for public services.

The French government threatened war to collect the rest.

“An army of 500,000 men is ready to fight,” wrote the French foreign minister in 1831 to his consul in Haiti, “and behind this imposing force, a reserve of two million.”

In response, President Boyer passed a law commanding every Haitian to be ready to defend the country. He built the leafy suburb of Pétionville, now the bastion of the Haitian elite, up the hill from the harbor — out of range of cannon fire.

Even French diplomats recognized their threats had prompted the Haitian government to pour money into its military, rather than send it to France.

“The fear of France, which naturally wants to be paid, does not allow it to reduce its military state,” reads a 1832 letter by one French diplomat.

In late 1837, two French envoys arrived in Port-au-Prince with orders to negotiate a new treaty and get the payments flowing again. The so-called independence debt was reduced to 90 million francs, and in 1838, another warship returned to France with Haiti’s second payment, which swallowed much of Haiti’s revenues once again.

The military sucked up another large chunk, according to the French abolitionist writer and politician Victor Schœlcher. After that, there was very little left for hospitals, public works and other aspects of public welfare. Education had been assigned a mere 15,816 gourdes — less than 1 percent of the budget.

From the very beginning, French officials knew how disastrous the payments would be for Haiti. But they kept insisting on getting paid, and for decades — with some exceptions, notably during periods of political upheaval — Haiti came up with the money.

The Times tracked each payment Haiti made over the course of 64 years, drawing from thousands of pages of archival records in France and Haiti, along with dozens of articles and books from the 19th and early 20th centuries, including by the Haitian finance minister Frédéric Marcelin.

Credit…Cannaday Chapman

In some years, Haiti’s payments to France soaked up more than 40 percent of the government’s total revenues.

“They don’t know which way to turn,” a French captain wrote to the Baron of Mackau in 1826 after collecting a shipment of gold from Haiti.

“After trying domestic loans, patriotic subscriptions, forced donations, sales of public property, they have finally settled on the worst of all options,” the captain wrote: 10 years of exorbitant taxes that were “so out of all proportion to the achievable resources of the country, that when each one sells all that he possesses, and then sells himself, not even half of the sums demanded will be collected.”

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Live Updates: Ukraine Appears to Surrender Control of Steel Plant in Mariupol

Army vehicles were so decrepit that repair crews were stationed roughly every 15 miles. Some officers were so out of shape that the military budgeted $1.5 million to re-size standard uniforms.

That was the Russian military more than a decade ago when the country invaded Georgia, according to the defense minister at the time. The shortcomings, big and small, were glaring enough that the Kremlin announced a complete overhaul of the military to build a leaner, more flexible, professional force.

But now, almost three months into Russia’s invasion of Ukraine, it is clear the Kremlin fell woefully short of creating an effective fighting machine. Russian forces in Ukraine have underperformed to a degree that has surprised most Western analysts, raising the prospect that President Vladimir V. Putin’s military operation could end in failure.

By any measure, despite capturing territory in the south and east, the Russian military has suffered a major blow in Ukraine. It has been forced to abandon what it expected would be a blitzkrieg to seize the entire country in a few days. Its forces were driven from around Kyiv, the capital. The flagship of its Black Sea fleet, the Moskva, was sunk; it has never controlled the skies; and by some Western estimates, tens of thousands of Russians have died.

Credit…Ivor Prickett for The New York Times

This war has exposed the fact that, to Russia’s detriment, much of the military culture and learned behavior of the Soviet era endures: inflexibility in command structure, corruption in military spending, and concealing casualty figures and repeating the mantra that everything is going according to plan.

The signs of trouble were hiding in plain sight. Just last summer, Russia held war games that the Ministry of Defense said showed its ability to coordinate a deployment of 200,000 men from different branches of the military in a mock effort to combat NATO. They would be among the largest military exercises ever, it said.

Lt. General Yunus-Bek Evkunov, the deputy defense minister, told reporters the exercises demonstrated Russia’s ability to rapidly deploy joint forces in a manner that would “make sober any enemy.’’

The whole exercise was scripted. There was no opposing force; the main units involved had practiced their choreography for months; and each exercise started and stopped at a fixed time. The number of troops participating was probably half the number advertised, military analysts said.

“It is the Soviet army, basically,” said Kamil Galeev, an independent Russian analyst and former fellow at The Wilson Center in Washington. “The reforms increased the efficiency of the army, but they only went halfway.”

Credit…Vadim Savitskiy/Russian Defense Ministry Press Service

When, after the Georgia conflict in 2008, Russia tried to revamp its military, the idea was to jettison the rigidly centralized, Soviet-era army that could supposedly muster four million troops in no time. Instead, field officers would get more responsibility, units would learn to synchronize their skills and the entire arsenal would be dragged into the computer age.

Many traditionalists resisted change, preferring the old model of a huge, concentrated force. But other factors also contributed to the military’s inability to transform. Birthrates plunged in the 1990s, leading to a shrinking pool of men that could be conscripted. That, and persistent low salaries, delayed recruitment targets. Endemic corruption handicapped the efforts.

But the basic problem was that the military culture of the Soviet Union endured, despite the lack of men and means to sustain it, analysts said.

“The Soviet military was built to generate millions of men to fill lots and lots of divisions that had endless stockpiles of equipment,” said Michael Kofman, the director of Russia studies at CNA, a research institute in Arlington, Va. “It was designed for World War III, the war with NATO that never came.”

Ultimately, the push for change stalled, leaving a hybrid version of the military somewhere between mass mobilization and a more flexible force, analysts said. It still favors substantial artillery over infantry troops who can take and hold land.

The scripted way the military practices warfare, on display in last summer’s exercises, is telling. “Nobody is being tested on their ability to think on the battlefield,” said William Alberque, the Berlin-based director of the arms control program at the International Institute for Strategic Studies. Instead, officers are assessed on their ability to follow instructions, he said.

Russia would like the world to view its army as it appears during the annual Victory Day parade — a well-oiled instrument of fit soldiers in dashing uniforms marching in unison and bristling with menacing weapons.

Credit…Yuri Kochetkov/EPA, via Shutterstock

“They use the military forces as a propaganda machine,” said Gleb Irisov, 31, a former air force lieutenant who left the military in 2020 after five years. He then worked as a military analyst for the official TASS news agency before quitting and leaving the country because he strongly opposed the invasion.

Senior military commanders argue that recent expeditionary forces, especially in Syria, provided real combat training, but analysts call that claim inflated.

Russian troops faced no real adversary in Syria; the war was mostly an air force operation where the pilots could hover over targets at will. Russia has not fought a large land war since World War II.

Yet Russia’s leaders exaggerated the country’s success. In 2017, Sergei K. Shoigu, Russia’s defense minister, bragged at a meeting of fellow ministers in the Philippines that Russia had “liberated’’ 503,223 square kilometers in Syria. The problem is that the area Mr. Shoigu claimed to have freed from militants is more than twice the size of the entire country, reported Proekt, an independent news outlet.

Credit…Russian Defense Ministry Press Service

With about 900,000 people overall, a little over one third of them ground forces, the Russian military is not that large, considering that it must defend a vast country covering 11 time zones, analysts said. But the goal of recruiting 50,000 contract soldiers every year, first stated a decade ago, has not been met, so there is still a yearly draft of 18- to 27-year olds.

Mr. Putin has not resorted to a mass military draft that would muster all able-bodied adult males for the war. But even if he did, the infrastructure required to train civilians en masse no longer exists. The consensus is that the bulk of Russia’s available ground forces have already been deployed in Ukraine.

Rampant corruption has drained resources. “Each person steals as much of the allocated funds as is appropriate for their rank,” said retired Maj. Gen. Harri Ohra-Aho, the former Chief of Intelligence in Finland and still a Ministry of Defense adviser.

The corruption is so widespread that some cases inevitably land in court.

In January, Col. Evgeny Pustovoy, the former head of the procurement department for armored vehicles, was accused of helping to steal more than $13 million by faking contracts for batteries from 2018 to 2020, according to TASS.

In February, a Moscow military court stripped Maj. Gen. Alexander Ogloblin of his rank and sentenced him to 4.5 years in prison for what the charges called fraud on an “especially large scale.” The authorities accused him of embezzling about $25 million by vastly overstating the expenses in state contracts for satellite and other equipment, the business news website BFM.RU reported.

Credit…Sergey Ponomarev for The New York Times

Huge contracts are not the only temptation. The combination of low salaries — a senior officer earns roughly $1,000 per month — and swelling budgets is a recipe for all sorts of theft, analysts said, leading to a chain reaction of problems.

Commanders disguise how few exercises they hold, pocketing the resources budgeted for them, said Mr. Irisov, the analyst. That exacerbates a lack of basic military skills like navigation and shooting, although the air force did maintain flight safety standards.

“It is impossible to imagine the scale of lies inside the military,” Mr. Irisov said. “The quality of military production is very low because of the race to steal money.”

One out of every five rubles spent on the armed forces was stolen, the chief military prosecutor, Sergey Fridinsky, told Rossiyskaya Gazeta, the official government newspaper, in 2011.

Mr. Irisov said he had encountered numerous examples of subpar equipment — the vaunted Pantsir air defense system unable to shoot down a small Israeli drone over Syria; Russian-made light bulbs on the wings of SU-35 warplanes melting at supersonic speeds; new trucks breaking down after two years.

In general, Russian weaponry lags behind its computerized Western counterparts, but it is serviceable, military analysts said. Still, some new production has been limited.

For example, the T-14 Armata, a “next generation” battle tank unveiled in 2015, has not been deployed in Ukraine because there are so few, they said.

Credit…Ramil Sitdikov/Host Photo Agency, via Getty Images

Russia has poured hundreds of billions of dollars into its military, producing under the State Armament Program a stream of new airplanes, tanks, helicopters and other matériel. Military spending has not dipped below 3.5 percent of gross domestic product for much of the past decade, according to figures from the International Institute for Strategic Studies, at a time when most European nations struggled to invest 2 percent of G.D.P. And that is only the public portion of Russia’s military budget.

This kind of financial investment has helped Russia make what gains it has in Ukraine.

Johan Norberg, a Russia analyst at the Swedish Defense Research Agency, said Russia and its military are too sprawling to expect them to fix every problem, even in a decade. The war in Ukraine exposed the fact that the Russian military is “not 10 feet tall, but they are not two feet tall, either,” he said.

Alina Lobzina and Milana Mazaeva contributed reporting.

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KB Home Announces the Grand Opening of Three New-home Communities in the Highly Desirable and Thriving Valencia Master Plan

VALENCIA, Calif.–(BUSINESS WIRE)–KB Home (NYSE: KBH) today announced the grand opening of three new-home communities in the highly desirable Valencia® master plan in Valencia, California. Sage, Vesper and Crimson feature spacious single-family homes, paired homes and townhomes in Valencia’s scenic high country. The new neighborhoods are situated just off West Magic Mountain Parkway near the Interstate 5 and Highway 126 interchange, providing easy access to the area’s major employment centers as well as shopping, dining and entertainment at Westfield Valencia Town Center. The three communities are also minutes to outdoor recreation, including hiking/biking trails and several popular golf courses. Additionally, the new neighborhoods are convenient to the greater Los Angeles metropolitan area, popular beaches and other attractions.

Valencia is an exciting and thriving master plan with several new amenities, including a pool with cabanas and lounge areas as well as open space and walking trails. Future planned amenities will include shops, restaurants, additional pools and over 30 miles of interconnected trails and multimodal pathways to explore by foot, bike or Neighborhood Electric Vehicles (NEVs). Homeowners will also enjoy 10,000 acres of parks and open space and schools in the popular Newhall School District.

The single-family homes at Sage at Valencia showcase desirable design characteristics like open kitchens and great rooms perfect for entertaining, generous bedroom suites with retreats, walk-in closets and ample storage space. The community offers one- and two-story floor plans that feature up to five bedrooms and three baths, and range in size from approximately 2,300 to 2,800 square feet. Pricing begins from low $1M.

Vesper at Valencia offers a selection of paired homes that blend attractive design features like beautiful kitchens and large bedroom suites with walk-in closets as well as loft spaces and covered patios. The community’s floor plans feature up to four bedrooms and two-and-a-half baths, and range in size from approximately 1,700 to 2,200 square feet. Pricing begins from the low $800,000s.

The beautiful new townhomes at Crimson at Valencia offer spacious kitchens overlooking large great rooms, expansive bedroom suites and optional downstairs bedrooms or dens. The community’s floor plans feature up to four bedrooms and three-and-a-half baths, and range in size from approximately 1,800 to 2,000 square feet. Pricing begins from the mid $700,000s.

“Our three new communities, Sage, Vesper and Crimson, feature spacious single-family homes, paired homes and townhomes in a picturesque setting that offer a wide selection of floor plans. The new neighborhoods are compelling additions to the highly desirable Valencia master plan, which showcases several family friendly amenities, including a pool with cabanas and lounge areas as well as open space and walking trails,” said Keltie Cole, President of KB Home’s Los Angeles and Ventura County division. “The new communities are also convenient to Interstate 5 and Highway 126, providing access to the Los Angeles metropolitan area’s major employers and attractions. As with other KB Home communities, Sage, Vesper and Crimson provide home shoppers with the opportunity to purchase a personalized, new KB home at a price that fits their lifestyle and needs.”

KB Home stands out from other homebuilders as the company gives homebuyers exceptional choice and control. KB Home starts by offering a wide variety of homes at an affordable price. From there, the builder gives buyers the ability to personalize their homes from floor plans to exterior elevations, from design options to where they live in the community. The KB Home team works hand in hand with homeowners every step of the way, so they have a real partner in the process.

Every KB home is designed to be ENERGY STAR® certified thanks to the quality construction techniques and materials utilized that ultimately deliver significant savings on utility bills compared to used homes. Additionally, all new KB homes are designed to deliver an enhanced indoor environment and include high performance ventilation systems, low- or zero-VOC products and other features guided by the Environmental Protection Agency’s (EPA) Indoor airPLUS standards.

The Sage, Vesper and Crimson sales offices and model homes are open for walk-in visits and private in-person tours by appointment. Homebuyers also have the flexibility to arrange a live video tour with a sales counselor. Pricing begins from low $1M, low $800,000s and mid $700,000s, respectively.

For more information on KB Home, call 888-KB-HOMES or visit kbhome.com.

About KB Home

KB Home is one of the largest and most recognized homebuilders in the United States and has built over 655,000 quality homes in our more than 65-year history. Today, KB Home operates in 47 markets from coast to coast. What sets KB Home apart is the exceptional personalization we offer our homebuyers — from those buying their first home to experienced buyers — allowing them to make their home uniquely their own, at a price that fits their budget. As the leader in energy-efficient homebuilding, KB Home was the first builder to make every home it builds ENERGY STAR® certified, a standard of energy performance achieved by fewer than 10% of new homes in America and has built more ENERGY STAR certified homes than any other builder. An energy-efficient KB home helps lower the cost of ownership and is designed to be healthier, more comfortable, and better for the environment than new homes without certification. We build strong, personal relationships with our customers, so they have a real partner in the homebuying process. As a result, we have the distinction of being the #1 customer-ranked national homebuilder in third-party buyer satisfaction surveys. Learn more about how we build homes built on relationships by visiting kbhome.com.

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