Moody’s suggested Russia could be in default after it attempted to service dollar bonds in Russian rubles. This would be one of the most severe consequences of Moscow’s exclusion from the Western financial system ever since the invasion of Ukraine by President Vladimir Putin.
- Russia paid roubles for dollar bonds
- Moody’s said that bonds had no provision for rouble payments.
- After the 1917 revolution, Russia defaulted upon foreign bonds
- Russia’s economy is facing its worst year since 1994
Moscow being declared in default would be Russia’s first major default of foreign bonds since the 1917 Bolshevik revolution. However, the Kremlin claims that the West is forcing Russia into default by imposing severe sanctions.
Russia paid a due payment on April 4 for two sovereign bonds, maturing in 2022 or 2042, in roubles instead of dollars as required by the securities.
Russia could therefore be considered a default according to Moody’s definition, if it is not cured by the 4 May which is the expiration of the grace period,” Moody’s stated in a Thursday statement.
“Bond contracts do not allow for repayment in other currencies than dollars.
Moody’s stated that although some Russian Eurobonds issued in 2018 allow payments in rubles under certain conditions, others issued prior to 2018 such as those due in 2022 or 2042 do not.
Moody’s stated that Moody’s believed investors didn’t receive the foreign-currency contract promise by the due date.
The Russian finance ministry didn’t respond to Friday’s request for comment. Anton Siluanov, the Russian Finance Minister, told Izvestia earlier this month that Russia will pursue legal action if it is forced to default.
Russia was an investment-grade country before Putin’s February 24 order for what he calls a special military operation against Ukraine. However, Russia’s sovereign bonds are now a target in the Kremlin’s economic war waged against the United States.
Russia defaulted in 1998 on $40 billion of its domestic debt. President Boris Yeltsin devalued the Russian ruble because Russia was insolvent after the Asian debt crisis. Falling oil prices and a falling dollar shook Russia’s confidence in its short-term debt.
Vladimir Lenin, Bolshevik Revolutionaries of 1918, repudiated Tsarist Debt. This shocked global debt markets as Russia had one of the largest foreign debt piles in the world at that time.
Russia is now in a financial crisis. Russia has the money, but Russia can’t pay. The United States, European Union and Britain have frozen the Russian reserves, the fourth-largest in the world, which Putin ordered to be stored up for such a situation.
