Russia defaulted on debt, says Moody’s

Russia defaulted

Paris: Russia defaulted on its international debt for the first time in more than a century, the White House and Moody’s credit agency said, as sweeping sanctions have effectively cut the country off from the global financial system, rendering its assets untouchable.

The White House stated that the default demonstrated the effectiveness of Western sanctions imposed on Russia since its invasion of Ukraine in response to news that Moscow had failed to pay approximately $100 million in interest on two bonds during a grace period of 30 days that ended on Sunday.

“This morning’s news around the finding of Russia’s default, for the first time in more than a century, situates just how strong the reactions are that the US, along with allies and partners, have taken, as well as how dramatic the impact has been on Russia’s economy,” a senior administration official said on the sidelines of a G7 summit in Germany.

Moody’s credit rating agency said Monday that the missed deadline “constitutes a default”, and it predicted that Russia would default on more payments in the future, given a decree on June 22 by the Kremlin that it would serve its foreign debt in rubles, rather than the currencies the bonds were issued in.

Russia denied it was in default, saying the payments due Sunday had been made, in dollars and euros, on May 27, and the money was stuck with Euroclear, a clearing house based in Belgium.

However, Moody’s credit agency, on Monday, said that the missed coupon payment constituted a default.

“Further defaults on coupon payments are likely,” Moody’s analysts wrote.

Russia has struggled to keep up payments on $40 billion of outstanding bonds since its invasion of Ukraine on Feb. 24.

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