Today, Sunday, Russia came closer to defaulting on its debt, amid the absence of evidence that investors who hold its international bonds have received payments, which threatens to be Russia's first default in decades, according to a Reuters report.
Russia has been scrambling to meet payments on $40 billion in bonds since it began its war on Ukraine on February 24, which has triggered sweeping sanctions that effectively isolated Russia from the global financial system and alienated many investors from its assets.
The Kremlin has repeatedly said that Russia has no reason to default, but that it is unable to send money to bondholders because of the sanctions, accusing the West of trying to artificially drive the country into default.
Russia's efforts - to avoid what may be its first major default on its international bond debt since the Bolshevik Revolution more than a century ago - hit an insurmountable obstacle when the US Treasury's Office of Foreign Assets Control effectively prevented Moscow from making the payments in late May. last May.
“Since last March, we have believed that Russia default was inevitable, and the only question was when?” Dennis Hranitsky, head of sovereign litigation at law firm Quinn Emanuel, told Reuters.
"OFAC stepped in to answer that question, and now the default is right before our eyes," he added.
While any official default would be largely symbolic given that Russia cannot and does not need to borrow internationally at the moment thanks to large oil and gas revenues;
It is likely that this default will increase borrowing costs for them in the future.
payment crisis
The crisis is related to the repayment of $100 million in interest related to two types of bonds;
One in US dollars and the other in euros, as Russia was supposed to pay on 27 May.
The repayment period is 30 days, ending on Sunday.
While any official default would be largely symbolic, given that Russia cannot and does not need to borrow internationally thanks to large oil and gas revenues;
It is likely that this default will increase borrowing costs for them in the future.
The Russian Finance Ministry said it had made the euro and dollar payments to the National Depository for Settlement, adding that it had fulfilled its obligations.
However, this money is not likely to reach many international bondholders.
For them, not receiving the money on time into their accounts is a default.
Since no specific time has been set in the documents, lawyers say Russia will likely have until the end of the next business day to make payments to bondholders.