Russian default looms as deadline for dollar bond payments arrives
Russia faced a crucial bond payment on Wednesday that could lead to the sanctions-racked country defaulting for the first time since 1998, and its first major international debt default since the Bolshevik revolution a century ago.
Moscow was due to make $117m (£89.4m) interest payments, or coupons, to investors holding $2-denominated bonds. But with much of its foreign exchange reserves frozen by international sanctions, it may be unable to pay.
That could pave the way to a historic default, after a 30-day grace period, that would add to the intense pressure on the Russian economy.
“The onset of war, western sanctions, the exodus of international conglomerates and freefalling investor confidence have led to Russia’s downfall with its currency, financial system, and the wider economy in a state of ruin,” said Victoria Scholar, head of investment at Interactive Investor. “Although Russia technically has a 30-day grace period before an official default, a full-blown collapse is almost inevitable.”
The Russian finance minister, Anton Siluanov, has accused the west of trying to engineer an “artificial default” by freezing access to the Bank of Russia’s foreign exchange reserves held by other major central banks.
Moscow has said it could pay international bondholders in roubles, if it were unable to service its debts in the currencies they were issued in. It argued that this would mean it was meeting the payment.
“Is that a default? From Russia’s point of view, we are fulfilling our obligations,” Siluanov said on state TV on Monday.
Russia’s finance ministry announced earlier this week it had sent a payment order of $117.2m, but that western sanctions could be a complication, in which case it would pay in roubles.
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