Moody’s rating agency has confirmed that Russia has defaulted on its foreign debt for the first time in a century, after not receiving $100 million in interest payments to bond holders.
The historic lapse follows a series of unprecedented Western sanctions that has isolated Russia from the global financial system following its invasion of Ukraine.
Russia lost a last opportunity to service its foreign currency debt after the United States last month lifted an exemption that allowed US investors to receive Moscow’s payments.
Moody’s said, “On June 27, holders of Russia’s sovereign debt did not receive coupon payments on two Eurobonds worth $100 million until the end of the 30-calendar-day grace period, which we would default under our definition.” incident.”
Moscow said on Monday that there was “no basis for calling this situation a default” because the payments did not reach creditors due to “actions of third parties”.
Russian officials insist they have the funds to honor the country’s debt, calling the situation a “spectacle” and accusing the West of pushing an “artificial” default.
Moody’s has warned that more defaults are likely.
Moody’s issued an “issuer comment” rather than a formal default declaration, as the sanctions prevent credit rating agencies from covering Russia’s sovereign debt.
The sanctions include freezing the Russian government’s $300 billion in foreign exchange reserves held abroad, making it more complicated for Moscow to settle its foreign debts.
After the United States closed the final payment loophole last month, Russia said it would pay off debt in rubles that can be converted into foreign currency using a Russian financial institution as a payment agent.
Moody’s said it would “treat payments in rubles as a default for bonds that do not allow such revaluation in the terms of the contract”.
The country last defaulted on its foreign debt in 1918, when the leader of the Bolshevik Revolution, Vladimir Ilyich Lenin, refused to recognize the enormous debts of the deposed Tsar’s regime.
Russia defaulted on domestic debt in 1998, when, due to falling commodity prices, it faced a financial squeeze that prevented it from advancing the ruble and paying off debts accumulated during the First War in Chechnya.
The International Monetary Fund’s number two official, Gita Gopinath, said in March that a Russian default would have a “limited” impact on the global financial system.
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