Sanctions push Russia to its first overseas debt default since 1917

The country faces a Sunday night deadline to meet a 30-day grace period on interest payments originally due May 27 but it could take time to confirm a default.

Published: 27th June 2022 01:32 PM  |   Last Updated: 27th June 2022 01:32 PM   |  A+A-

Russian President Vladimir Putin.

Russian President Vladimir Putin.

By PTI

KYIV: Russia is poised to default on its foreign debt for the first time since the 1917 Bolshevik Revolution, further alienating the country from the global financial system following sanctions imposed over its war in Ukraine.

The country faces a Sunday night deadline to meet a 30-day grace period on interest payments originally due May 27. But it could take time to confirm a default.

"While there is a possibility that some magic could occur and Russia gets the money through financial institutions to bondholders despite sanctions, nobody's making that bet," said Jay S. Auslander, a top sovereign debt lawyer at the firm of Wilk Auslander in New York.

"The overwhelming probability is they won't be able to because no bank is going to move the money. Last month, the US Treasury Department ended Russia's ability to pay its billions in debt back to international investors through American banks."

In response, the Russian Finance Ministry said it would pay dollar-denominated debts in rubles and offer the opportunity for subsequent conversion into the original currency.

"Russia calls any default artificial because it has the money to pay its debts but says sanctions have frozen its foreign currency reserves held abroad. There is money and there is also the readiness to pay," Russian Finance Minister Anton Siluanov said last month.

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"This situation, artificially created by an unfriendly country, will not have any effect on Russia's quality of life." Tim Ash, the senior emerging market sovereign analyst at BlueBay Asset Management, tweeted that the default "is clearly not" beyond Russia's control and that sanctions are preventing it from paying its debts because it invaded Ukraine.



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