On the international financial markets, Russia is as good as unregistered due to Western sanctions in the wake of the Ukraine war.

But what is supposed to increase the pressure on President Vladimir Putin and make the Kremlin give in by isolating the Russian economy has unpleasant side effects for investors.

Experts see Russia's debt service in acute danger.

After 1998, there could be another state bankruptcy – even if a lot is different this time.

Despite a full state coffers, Russia is threatened with insolvency.

The President of the Berlin DIW Institute, Marcel Fratzscher, considers a national debt bankruptcy in Russia to be very likely in the coming months.

Due to Western sanctions, there is a high risk that Russia will not service its debts to international creditors, Fratzscher told the German Press Agency.

Some German investors would also suffer from a default.

In addition, there could be distortions on the financial markets.

The Russian central bank is already trying to cushion the economic impact of western sanctions on the financial market with a number of measures.

The central bank also imposed drastic restrictions on foreign exchange trading on Wednesday night.

At junk level

According to the financial news service Bloomberg, Russia has 49 billion dollars in government bonds outstanding in dollars and euros.

More than $100 million in interest payments are due on March 16.

A $2 billion bond issue is due to expire on April 4th.

"We see default as the most likely scenario," US investment bank Morgan Stanley wrote to clients on Monday.

"I would be shocked - absolutely shocked - if they bother to make their payments later this month," ex-hedge fund manager Jay Newman said in a recent Bloomberg interview.

Even the major rating agencies give investors little hope.

Fitch, Moody's and S&P now see Russia's creditworthiness in the so-called junk zone, which is intended to indicate high-risk investments.

Fitch warned on Tuesday of an imminent default.

S&P cut its credit rating eight notches on Friday, to just above the default category.

At Moody's, the rating dropped to even lower junk levels due to "serious concerns about Russia's willingness and ability to service its debt."

That brings back memories.

No protection for creditors

Flashback: August 17, 1998 marks the blackest day in the economic history of the new Russia.

At that time, the government stopped servicing the domestic debt due to tight budgets and released the ruble for devaluation.

The financial markets tumbled.

Trust in Russia was gone.

After years of stability, the ruble lost 75 percent in just a few weeks.

Russian banks could no longer meet their obligations.

International financial organizations stopped supporting it.

This time the situation differs in important respects.

The starting position is completely different.

At that time, Russia had high national debts and low foreign exchange reserves.

In addition, the ruble was still pegged to the dollar, so the central bank had to defend the exchange rate.

In the wake of the Asian crisis and falling oil prices, this turned out to be hopeless.

Today, Russia's treasury is bulging, not least thanks to high oil and gas prices.

But the sanctions have frozen much of Russia's central bank reserves of around $640 billion.

The credit watchdogs at S&P and Moody's also emphasize that the main reasons for the increased risk of non-payment are not money shortages, but the consequences of the sanctions.

They also severely limit the central bank's options.

Even if Russia were to pay, it would therefore be uncertain whether creditors abroad would get their money.

Another problem for international investors: credit default insurance may not apply to some bonds.

Because Russia could settle debts in rubles, but should not transfer the money abroad.

Either way, a tricky situation is emerging.

Expert Newman took a closer look at Russian bond prospectuses and found some of "the craziest things I've ever seen."

Unlike standard government debt, most bonds did not contain a clause waiving government immunity in the event of default, leaving it unclear how and where the government could be taken to court.

“There is absolutely no protection for creditors with all these bonds.”

Newman knows what he's talking about.

He worked for years for the NML Capital hedge fund, which specializes in cannibalizing bad loans and is part of US billionaire Paul Singer's Elliott empire.

Newman also played an important role in the 15-year legal dispute over the repayment of Argentina's bond debt from the approximately $100 billion state bankruptcy at the end of 2001.

NML ultimately collected the debt.

With an army of lawyers, the hedge fund hunted down state property abroad and even had a naval frigate in Ghana confiscated in 2012.

But Newman wants nothing to do with Putin's papers: "I wouldn't pay a penny for these bonds."