Russia appeared to be ready for its first sovereign default in decades, with some mortgagees saying they had not received interest on Monday after the expiry of a key payment date a day earlier.
ussia has struggled to maintain payments on $ 40 billion in outstanding bonds since its invasion of Ukraine on February 24, as drastic sanctions effectively cut the country off from the global financial system and made its assets invulnerable to many investors.
The Kremlin has repeatedly said there are no grounds for Russia to fail, but it is unable to send money to mortgagees because of sanctions, which accuse the West of trying to do so in an artificial way. to drive default.
Russia’s efforts to avoid what would be its first major default on international bonds since the Bolshevik revolution more than a century ago hit an insurmountable roadblock in late May when the US Treasury Department’s Foreign Asset Management Office (OFAC) Moscow effectively blocked to make payments.
“Since March, we thought a Russian default was probably inevitable, and the question was just when,” Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel, told Reuters.
“OFAC intervened to answer that question for us, and the standard is now on us.”
Although a formal default would be largely symbolic, as Russia is currently unable to borrow internationally and does not need to, thanks to large oil and gas export revenues, the stigma is likely to increase its borrowing costs in the future.
The payments in question are $ 100 million in interest on two bonds, one denominated in US dollars and another in euros, Russia would pay on May 27.
The payments had a grace period of 30 days, which expired on Sunday.
Russia’s Ministry of Finance said it had made payments to its National Settlement Office (NSD) in euros and dollars, adding that it had met its obligations.
Some Taiwanese holders of the bonds did not receive payments on Monday, sources told Reuters.
For many mortgage holders, it is a default not to receive the money they owe in their accounts on time.
With no exact deadline specified in the prospectus, lawyers say Russia may have until the end of the next business day to pay the mortgagees.