Russia has defaulted on its foreign debts for the first time in a century, in a humiliating blow to Vladimir Putin that further freezes his country outside the Western financial system.
After narrowly diverting defaults several times since the launch of an invasion of Ukraine in late February, Moscow failed to pay $ 100 million in coupons in bonds maturing last month, for which it ended on Sunday. grace period of 30 days.
Payment had become virtually impossible after the White House moved to block channels to creditors in the West, meaning Russia could not settle its debts despite the means and willingness to do so.
The default, the first time Russia has not made payments on international bonds since the Bolshevik revolution of 1918, is primarily a symbolic event for now: Russia is already a pariah within the Western financial system and is unlikely to take advantage of markets. for money in the near future.
But it will further tie Mr. Putin’s hands as the country suffers its biggest economic shock in years, and could starve Russian companies of future financing options if the contagion spreads to corporate bonds.
The country defaulted on its domestic debt in 1998 as it underwent a post-Soviet economic transformation.
Russia has claimed that the defect is a farce artificially designed by the US. Last week he said he would pay off his debt in rubles, a move that creditors have already ruled out. Anton Siluanov, the Minister of Finance, described the situation as a “farce”.
He said: “Anyone can declare whatever they want.
“But anyone who understands what’s going on knows that this is by no means a default.”
Normally, one of the Wall Street rating companies, probably S&P, Fitch or Moody’s, would declare a default. But European Union sanctions have forced companies to withdraw their coverage from Russia.
However, bonds on which payment has been lost allow their holders to declare a default if 25% agree that the default has occurred. The documents attached to the debt instruments give three years for a claim to be made, which means some investors can wait to see if Russia rehabilitates itself in the global financial system during that time.
If they take action, doing so through the legal system could be difficult because Moscow has said it will reject the jurisdiction of any foreign court.
Foreigners had about $ 20 billion in Russian Eurobonds in early April. Several payment deadlines have now passed, including last Thursday and Friday, so it may soon be considered that Russia has defaulted on several debts.