According to Bloomberg, Russia has defaulted on foreign currency sovereign debt for the first time since 1918.
Due to the sanctions imposed against Russia, which made payments in foreign currency impossible, there was a default on its external debt to foreign creditors, the newspaper writes.
For several months, the Russian Federation has been finding ways to circumvent the sanctions restrictions due to the Kremlin’s invasion of Ukraine. But on Sunday evening, the $100 million interest grace period ended until May 27. If a payment is missed, it is considered a default.
Edition calls the situation a sign that the country is turning into an “economic, financial and political pariah.” Bloomberg recalls that since March, the foreign exchange reserves of the central bank of the Russian Federation have remained frozen, and the largest banks have been cut off from the world system.
However, the default is rather symbolic, given the damage that the sanctions have already caused to the economy and markets. Moscow refuses to acknowledge the default and claims it has the funds to cover the bills but is unable to do so.
Last week, the Russian Federation announced that it would switch to servicing its outstanding $40 billion sovereign debt in rubles, criticizing the “force majeure” situation it says the West has artificially created.
There will be no official announcement of default. This is usually done by international rating agencies, but they have all suspended their activities in Russia, Bloomberg points out. At the same time, bondholders could have made such an announcement, but they are still trying to assess what are the chances of returning all or at least part of their money, the agency writes. For creditors to default, a quarter of the bondholders would need to agree.